IDC Sees Slumping Chip Growth in FY12 on PC Weakness; Expects Rebound in FY13

December 26, 2012 9:38 AM EST
Despite strong sales of portable devices like smartphones and tablets in 2012, semiconductor revenue will be stagnant as PC sales offset most gains.

According to the latest data from International Data Corporation's (IDC) Semiconductor Applications Forecaster (SAF), chip sales in 2012 are expected to reach $304 billion, up just 1 percent from 2011.

However, growth is expected to rocket about 4.9 percent in 2013 to $319 billion and log a compound annual growth rate (CAGR) of 4.1 percent from 2011-2016, reaching $368 billion in 2016.

IDC attributes the slump in chip sales to, "weakness in PC demand, DRAM and overall memory price deterioration, and semiconductor inventory rationalization, coupled with continued global macroeconomic uncertainty from lower global GDP growth, a slowdown in China, the Eurozone debt crisis and recession, Japan's recession, and ongoing fear of fiscal cliff negotiations' impact on IT spending by corporations."

Moving into 2013, IDC sees inventories coming in-line with demand by the second quarter and growth resuming in the latter part of the year. Semiconductors for smartphones will see healthy revenue growth as appetite for data, multimedia processing, and multitasking will drive high-end smartphone demand in developed countries while an ongoing transition to 3G networks will accelerate smartphone adoption in developing regions, IDC said.

Regionally, Japan and Europe continue to be the two weakest regions, IDC noted. Although GDP growth has slowed in China, India, and Brazil, demand for smartphones, tablets, and automotive electronics remains strong. In the U.S., 4G phones, mobile consumer devices (tablets and e-readers), network infrastructure, and set-top box deployments will drive a healthy semiconductor growth cycle over the next five years.

Chipmakers like Texas Instruments (Nasdaq: TXN), Intel (Nasdaq: INTC), Integrated Devices (Nasdaq: IDT), Analog Devices (Nasdaq: ADI), STMicro (NYSE: STM), and others will be on investors' radars moving forward.

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