iSupply: Semiconductor industry to recover this quarter

Research firm iSuppli reports the global semiconductor industry is expected to finally return to growth this quarter, signaling the start of the industry recovery. Revenue is expected to grow by 10.6 percent year-over-year in Q4 2009, while total semiconductor revenue of 2009 is expected to contract by 16.5 percent.

The first half of 2010 is expected to be slightly down compared to Q4 2009, but the second half of next year is expected to deliver strong growth. iSuppli expects global semiconductor revenue to rise by 13.8 percent in 2010, ending the two-year losing streak.

“The seeds of the current recovery were sown in the second quarter,” said Dale Ford, senior vice president, market intelligence, for iSuppli. “During that period, manufacturers began to report positive book-to-bill ratios, indicating future revenue growth. This was followed by another sequential increase in revenue in the third quarter. “Meanwhile, semiconductor inventories returned to more normal levels in the third quarter after chip suppliers shed stockpiles. They did this by slashing costs dramatically in order to reduce unsold inventory they’d been carrying since the beginning of 2009.”

Caution Ahead While these signs are encouraging, and sequential quarterly increases in revenue will continue into 2010, this growth will not be sufficient to lift semiconductor revenues back to pre-recessionary levels until the 2011-2012 time frame. Furthermore, there remain some worrisome indicators, such as the climbing U.S. unemployment rate, which reached 9.7 percent in August and is projected to exceed 10 percent at its peak. Also worrisome are the struggling credit and banking markets as well as the rising number of foreclosures in the U.S. housing market, clouding the overall economic outlook. Collectively, these factors have served to constrain consumer spending.