2011: Crash and Burn or Return to Normalcy?

By Jim Feldhan
Seasonally, the first half of most typical years, semiconductor sales are weak and not necessarily indicative of a downturn. This year however, the first half will be up over 2%, a healthy growth rate after the 31.8% increase in revenues the industry experienced in 2010. 2011 represents a return to the “normal” semiconductor cycle, averaging an 8% increase in revenue YOY.

There has been excitement in the industry lately for the consumer and automotive markets, and the memory and IP markets. There has been significant innovation in the consumer market with Smart TVs changing how the average consumer interacts with technology in their living room and tablets changing how toddlers learn about the world. Microsoft’s Kinect is changing the way gamers understand games (though of course, Nintendo led the way). This bodes well for the semi industry in the coming year.

The consumer industry has a ripple effect down the supply chain, and in the memory market, Semico expects unit shipments of NAND will grow 13.4% in 2011, surpassing 6.0B units. The growth of the Tablet PC market in 2011 is gobbling up a significant portion of the total NAND shipment, as will the growth of smartphones and memory cards. Even the DRAM industry will be diversifying away from a commodity-centric focus to accommodate memory demand for smartphones, tablet PCs, social networking, 3DTV , and Blu-ray.

To understand how these changes affect the overall market, Semico created the Inflection Point Indicator (IPI) as a forecasting tool that can predict semiconductor revenues approximately four quarters in advance. Combined with end-market analysis, we can accurately predict the ups and downs of the industry.

Source: Semico Research Corp.

The previous twelve months on the blue line is the forecast for the pink and green line. On the graph above, the blue line is showing a small decline followed by a large incline, indicating the seasonal decline in the first quarter followed by a strong increase (10%+) in the second quarter.

The industry news supports what our Inflection Point Indicator (IPI) has been showing all year. For eight years the IPI has been an accurate forecasting tool to know far in advance the industry will swing up or down. If you’d like to subscribe to our IPI to stay ahead of the news in 2011, contact Sam Caldwell at [email protected] or 602-214-9697.