Chip industry to see 'remarkable' growth this year

Expect $300B in revenue this year, fastest growth in 10 years, says iSuppli

After several years of suffering through a deep economic slump, the worldwide semiconductor industry is about to hit a high-water mark, signaling a rejuvenation of the industry.

The global chip industry, which has been on an upswing since earlier this year, is poised to see its highest growth in the past decade, according to research company iSuppli Corp. Revenues for the worldwide semiconductor market are expected to rise to $300.3 billion, up 30.6% from $229.9 billion in 2009.

It's the first big growth rate since the industry's whopping 36.7% expansion in 2000, noted iSuppli.

"Building on the continuing expansion in sales that followed the downturn in late 2008 and early 2009, the semiconductor industry is set to achieve remarkable revenue growth and record size in 2010," Dale Ford, a senior vice president at iSuppli, said in a written statement. "Chip sales growth this year will be fueled by a number of key factors, including continued strong consumer demand for hot electronic products, diligent inventory and capacity management efforts among chip makers and the arrival of innovative technologies at both the component and end-system levels."

There have been several reports in the last six months indicating the chip market is on its way back from the economic doldrums of 2008 and 2009. In January, industry analyst house IDC reported that a rise in PC chip shipments in the last quarter of 2009 indicated that the industry was on the mend.

And last fall, Gartner Inc. predicted that global semiconductor revenue would rebound in 2010 after sales declines of more than 10% in 2009. Gartner predicted at the time that 2010 worldwide semiconductor revenue would hit $255 billion, up 13% from 2009 and about the same as 2008.

Dan Olds, an analyst for The Gabriel Consulting Group, said the chip industry tends to be a bellwhether for the entire economy. So this, he said, is good news.

"I mean the chip industry is an early indicator of general economic activity that will take place months down the road," said Olds. "It's also a signal that companies anticipate higher product sales and are gearing up for it."

However, Olds cautioned that no one should start popping corks and celebrating just yet. While the iSuppli report means that hardware manufacturers are buying chips to build more products, it remains to be seen whether consumers will be in a buying mood.

"It's the companies betting that things will get better," added Olds. "But we have to wait and see if it actually happens or if they'll be stuck with a lot of unsold inventory."

iSuppli also reported today that expected consumer demand for PCs, mobile handsets and LCD-TVs should drive chip sales this year. And the research company noted that its analysts also expect dramatic growth in DRAM revenue. iSuppli is predicting that DRAM revenue growth in 2010 should be nearly 77% ahead of last year's figures.

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Tags GartnerchipsiSuppliGabriel Consulting GroupGFC

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Sharon Gaudin

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