Semiconductor industry revenue is expected to post strong gains in the second half of 2010, but suppliers should watch inventory very carefully and pay close attention to demand to prevent significant manufacturing issues from arising by early next year, warns market research firm iSuppli Corp.
With most semiconductor companies coming off four successive quarters of growth in revenue and sales, the trend toward expansion most likely will continue into the third and fourth quarters of the year, iSuppli semiconductor forecasts indicate.
Total semiconductor market revenue for the third quarter of 2010 is projected to reach $81.5 million—up 6.7 percent from $76.4 million in the second quarter. Revenue will then inch up a very slight 0.4 percent to hit $81.8 million in the final quarter of the year.
Overall, the revenue forecast for 2010 anticipates the semiconductor industry growing a sizable 35.1 percent to $310.3 billion—the most robust increase since 2000 when the industry expanded by 36.7 percent.
Despite the positive forecasts, important concerns remain on how the industry will have to manage the rising tide of inventory, coming in the wake of renewed demand for semiconductor chips.
The question is all the more complicated, iSuppli believes, because inventory is tied to the unpredictable nature of demand. Historically, the semiconductor industry has not been capable of pulling back on production or manufacturing expansion until overall demand slows significantly, semiconductor spend analysis shows.
Some ominous signs also warn of continuing caution. Recovery from the global recession appears to be stalling, financial issues in Europe are threatening to spread, and conditions in North America are not improving at a rate that may sustain consumer confidence.
As a result of these issues, manufacturers must be vigilant in monitoring demand from their customers during the next two quarters, iSuppli believes. Should demand for electronics slow, semiconductor companies must take immediate action and temper factory expansions to avert any long-term inventory problems.
In the end, the key question surrounding further growth is not whether the semiconductor industry has innovative new products to offer or enough capacity to sustain current manufacturing demand—but whether external forces once again will cause the global consumer to pull back on spending patterns.
All told, the industry should continue to grow through the third quarter, iSuppli anticipates. However, any uncertainties in the fourth quarter most likely will result in a temporary adjustment in demand during that time.
As such, semiconductor companies should be prepared to adjust factory run rates as soon as the late third quarter, in order to forestall significant slowing in the first part of 2011.
Read More > Semiconductor Trends: IDMs Forecast Strong Revenue Growth into Second Half of 2010