Chip Market Poised For Recovery In 2010

After a difficult 2009 thanks to the global recession, the Semiconductor Industry Association (SIA) is predicting a recovery for the global semiconductor market in 2010.

According to the SIA, global sales of semiconductors during 2009 fell 9 percent, to $226.3 billion (£142 billion), compared to 2008 when sales were $248.6 billion (£156 billion).

However, the SIA had only predicted sales for 2009 to be $219.7 billion (£138 billion). In addition, December sales were $22.4 billion (£14 billion), an increase of 29 percent from the same month in 2008.

The numbers, released 1 February, indicate that 2009 did not turn out to be as bad as predicted, and set the stage for stronger growth in 2010, according to SIA President George Scalise.

“2009 turned out to be a better year for the global semiconductor industry than expected,” Scalise said in a statement. “A strong focus on inventories throughout the supply chain mitigated the impact of the worldwide economic downturn and positioned the industry for growth as the global economy recovers.”

Fourth-quarter sales were driven in large part by growing demand for such devices as PCs, mobile phones and other consumer electronics. PCs and cell phones accounted for about 60 percent of the semiconductors sold in the quarter, and the SIA expects sales of those devices to grow to the low to mid-teens in 2010, which will further boost semiconductor numbers.

Unit sales of consumer electronics will be in the mid-single digits, Scalise said.

“We are also seeing the effects of recovery in the enterprise sector, and we believe this trend will continue,” he said.

Also driving demand are the emerging markets of China and India, where consumers are buying handsets and computers. At the same time, both regions are investing in wired and wireless infrastructures, which will further drive demand for semiconductor products. The Asian market was the only one to see sequential growth from November to December, and saw the largest jump – 42.9 percent – in sales in December 2009 over the same month in 2008.

In addition, the growth of such new – and relatively inexpensive – devices as netbooks and tablets are broadening the markets for semiconductor products, Scalise said.

“With improving consumer confidence and signs of economic recovery around the world, the semiconductor industry is well-positioned for growth in 2010,” he said.

Scalise isn’t the only one who sees an increasingly strong semiconductor market.

In a research note issued 1 February, Broadpoint AmTech analyst Doug Freedman said the semiconductor space is well-positioned for a recovery, despite what other analysts have said about the marketing peaking.

“The industry is targeting sustained profitability, not unreasonable growth forecasts,” Freedman said in his note, supporting his decision to upgrade the sector for investors.

He said Wall Street financial analysts underestimated the demand for electronic devises during the recession-hobbled 2009, and that there are both short-term and longer-term issues that will continue to drive demand.

In the short term, Freedman pointed to the Chinese New Year – in mid-February – as a catalyst for driving consumer demand for electronic devices.

In the longer term, technologies such as touch-enabled devices, server-supported applications, virtualisation and computing mobility will help drive demand, he said.