Semiconductor Industry Development

In addition to rising demand, this year's semiconductor market has also been injected with strong growth factors, prompting iSuppli Corporation to raise its semiconductor sales forecast this year to record highs.

iSuppli Corporation now predicts that global semiconductor sales will increase by 35.1% in 2010, from US$229.6 billion in 2009 to US$310.3 billion. iSuppli's previous forecast released on May 6th believed that this year's growth was 30.9%.

In 2010, sales growth will reach 80.7 billion U.S. dollars, which will be the largest annual sales increase in the history of the semiconductor industry. By contrast, the second largest increase was just under $60 billion, which was the record set in 2000 during the dot-com era.

Due to strong consumer demand for electronic products, the semiconductor market is expected to achieve significant growth in 2010. However, due to many factors, semiconductor sales are now clearly being injected into growth factors in 2010. These factors include rising prices, in-stock replenishment, and increased chip content for major electronic products such as smart phones and high-end LCD TVs. All of these are pushing this year's chip sales to a staggering scale.

Strong sales of electronic equipment

The strong growth in semiconductor sales in 2010 was due to a significant increase in sales of electronic equipment. In 2010, factory OEM sales of electronic equipment are expected to increase by US$131 billion, reaching US$1.54 trillion, which is 9.3% higher than in 2009. Electronic OEM sales hit a high of US$1.53 trillion in 2008.

In the areas of PCs, mobile phones, LCD TVs and other semiconductor-rich products, the growth in the shipments and sales of electronic equipment is exceeding the expected level.

Prices rise, the chip is strong

However, the percentage growth rate of semiconductor sales will greatly exceed the terminal equipment market, including the following reasons:
Semiconductor manufacturers' careful management of inventory and strict control of production capacity have caused supply to meet demand. As a result, prices in many semiconductor sectors have risen.

In addition, the use of innovative technologies at the system and component level has also led to a rise in highly integrated semiconductor sales, which has resulted in a greater share of value in electronic systems. These integrated semiconductors are usually expensive.

Following the significant reduction of costs and inventories in 2009, the semiconductor industry has been actively establishing inventory to cope with the strong growth in demand for electronic products. This also makes semiconductor growth exceed the level reflected by the end demand.

No, bubble

Although the growth momentum in 2010 is comparable to that in 2000, it should be pointed out that this cycle is completely different from 2000. Strong growth in 2000 followed the strong expansion in 1999 and was driven by an unsustainable demand bubble. The bubble burst in 2001, when sales fell 28.6%. Compared with 2010, growth was a recovery based on the 2009 recession and is expected to continue into 2011.

It is impossible to double the bottom

Regarding the overall economy and the semiconductor industry, one of the most frequently heard words last month was “secondary bottoming.” People are worried that the recent performance of the semiconductor market is not quite normal, and it will soon be corrected. However, iSuppli Company disagrees with the second opinion. In contrast, iSuppli Corporation predicts that in the second half of 2010 and 2011, it will return to a more standard growth pattern, and semiconductor sales will increase by 7% next year.

In the second quarter of 2010, semiconductor sales increased by 8.2% month-on-month, which is expected to be the peak growth period this year. The growth rate in the third quarter will fall to 6.7%, and it is expected to be only 0.4% in the fourth quarter.

iSuppli Corp. predicts that the semiconductor industry will continue to grow for seven quarters and then decline seasonally in the first quarter of 2011. This will be the longest continuous growth period after the industry grew continuously for 19 quarters from 1991 to 1995.

Memory struggles to grow

Observing the specific semiconductor device field in 2010, the memory sector will be among the strongest growth.

DRAM sales will increase by more than 86%, and NAND flash memory will increase by more than 33%. This will result in an overall memory sales increase of 56% this year.

All major semiconductor categories - micro components, logic, analog, discrete and optical and sensors - are expected to increase by more than 25% in 2010.

Other major growth drivers in 2010 will be LEDs, programmable logic devices (PLDs), general-purpose analog ICs, and discrete components. The growth rate of these market areas in 2010 is expected to be between 36% and 49%. NOR flash is expected to be the only semiconductor product with a growth rate of less than double digits in 2010.