Most major research firms predict a slowdown in semi sales for this year, but fundamentals give hope for the future.
Jim Feldhan, president of Semico Research, recently confirmed a precaution he offered during our July interview at Semicon West. Back then, Feldhan listed both volatile economic conditions and politics as the main drivers behind today’s semiconductor market uncertainty.
Most of the major semiconductor research firms have downgraded their 3rd and 4th quarter 2012 predictions. A recent EETimes article captured these predications ina a convenient table:
Missing from this list of firms was e-Forecasting.com. Yesterday, I contacted the company’s CEO - Maria Simos Sogard – to get her input. She confirmed the downward trend in the semiconductor market, which seems to mirror the general downward trend in North American industrial production.
“Looking at quarterly data, our second quarter forecast for industrial production was also revised down. Last month, we forecast second quarter growth of 0.2% and we now forecast a decline of 0.9%. For the third quarter, we now forecast 0.8% growth as opposed to a much stronger 2.7% growth forecast last month. Rounding out the year, initially we forecast 9.7% growth in the fourth quarter, now it estimated lower at 7.3% growth.”
Specific to the semiconductor market, the e-Forecasting.com leading index shows a downward trend (see chart). On average, this index leads by 5-6 months of real semiconductor sales. This means that the next several quarters will trend downward in sales. Still, e-Forecasting is not predicting a recession in the market, pegging it’s probably at slightly above 25%.
Should semiconductor professionals be worried about these downward trends? While it may be difficult to feel too optimistic, one should note that the drivers for semiconductor growth – listed by Feldhan – remain unchanged. He listed these drivers during our July interview:
- On the computing side – yes, desktops are declining. But then, the other part of the computing market is the mobile side … with notebooks and ultrabooks. Further, you have the tablet PC market, which is still exploding. On the infrastructure side, everyone still wants to get Netflicks and Youtube. So all of that continues to grow very strongly this year.
- Smartphone is another huge market. Those (growth) trends are going to continue, despite the economics around the world. … Of course, it is a worldwide market (in which) some of the emerging markets are still growing fairly well. On the infrastructure side of the communication market, the service providers are still building out 3G and 4G. That will continue for the next several years.
Taken together, these drivers will help maintain positive growth through this year and expanded growth once global economic and local political matters settle down.
These fundamentals should give the semiconductor market reasons for both patience and optimism.