iSuppli Sees Challenging Year, Normal Growth for Semis in 2010 (TXN, FCS, NSM, TSM, more)

Tech-oriented research firm iSuppli.com sees the semiconductor industry having a more challenging year in 2010 compared to growth seen over the last three years.

The firm sees 2010 semiconductor revenue of $279.7 billion, which is 21.5% up versus the $230 billion reported in 2009, but only up 8% from revs of $258.9 billion in 2008, and 2.3% higher than 273.4 billion in 2007 -- three years prior. This amounts to a CAGR of about 0.5% over four periods -- not exactly rocketing growth.

Comparisons with 2007 and 2008 are more accurate than those of 2009, because market factors in 2009 were more macroeconomic and independent of the tech business, accoring to iSuppli.

A Senior VP for iSuppli says that 2010 only looks spectacular to 2009, and otherwise is just another year of sequential growth for the industry.

A 12-month rolling average makes 2010 look like a veritable earnings-playground for manufacturers, as recovery looks to be the strongest in history. But this, again, only compares to the depressed levels of 2009.

Although some mobile phone manufacturers have reported constraints for semi components, it may not be directly due to an increase in demand so much as a bottleneck in production. Manufacturers cut jobs and slowed production in 2009 in response to weak demand, and may have some trouble tooling back up should demand spike in 2010.

Another positive nod for semis is increased capital spending among chipmakers as it is expected to rise approximately 56.8% in 2010, versus 2009.

Capital spending as a whole, iSuppli says, will still remain at depressed levels compared to 2007 and 2008. Additionally, spending by semi manufacturers will be more technology oriented to position well in the market, rather than on planned expansions of capacity.

Some other limiting factors include supply chain constraints as demand rises, restoration of test and assembly equipment, and semi equipment suppliers to restore supply capacity on increased demand.

Stocks to watch, among others, in 2010 include:

• Taiwan Semiconductor (NYSE: TSM);
  
• Atmel Corp. (NASDAQ: ATML);
  
• Cypress Semi (NYSE: CY);
  
• LSI Corp. (NYSE: LSI);
  
• National Semi (NYSE: NSM);
  
• Fairchild Semi (NYSE: FCS);
  
• Microchip Technology Inc. (NASDAQ: MCHP); and
  
• Texas Instruments (NYSE: TXN)

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