Research firm iSuppli today lowered its forecast for semiconductor sales in 2010.
Chip sales around the world are now expected to hit $302 billion this year, a gain of 32 percent from $228 billion in 2009. That's down from iSuppli's prior forecast of 35.1 percent growth for the year, a change it attributed to weaker consumer demand for certain electronic devices and higher industry inventory.
Revenue in the fourth quarter is expected to drop by 0.3 percent from the third quarter, the first sequential drop since the market took a spill in the fourth quarter of 2008 and first quarter of 2009.
"There has been a significant slowdown in the second half in consumer demand for some electronic devices, including PCs," Dale Ford, senior vice president at iSuppli, said in a statement. "Meanwhile, inventories have been building throughout the semiconductor supply chain. These factors will conspire to cause a small sequential decline in semiconductor revenue in the fourth quarter."
Despite the lower outlook, the news is still good. This year's sales will set a record for the semiconductor industry, climbing by $73 billion over 2009. That's also around $28 billion higher than sales in 2007, the last peak year for the industry.
The major area driving chip sales will be the data-processing market, which is dominated by PCs. Thanks to higher shipments of mobile computers, including tablets, semiconductor sales to this segment will grow by 38.6 percent this year. Another strong area will be wireless communications. With continued demand for smartphones, sales to this segment will rise by 30 percent in 2010.
But even slower markets like wired communications, and consumer electronics will boost growth in semiconductor sales for the year as a whole by 25.4 percent and 26.5 percent, respectively.
Although the industry outlook is a bit murky, and fourth-quarter sales are expected to inch downward, iSuppli doesn't see this as the start of any major downturn in the chip market.
"Unstable economic conditions and worrisome market reports continue to create an environment of poor visibility and ongoing uncertainty in the electronics industry," Ford said. "This has led to frequently expressed concerns regarding a potential double-dip downturn in both the overall economy and in the electronics and semiconductor industries. However, based on its most recent analysis of the electronics supply chain, iSuppli expects the chip business to experience a soft landing in 2011 and not to suffer the kind of dramatic downturn seen in 2009."
Looking ahead, iSuppli expects semiconductor sales to rise by 5.1 percent in 2011, adding up to average annual gains of a bit more than 4 percent from 2010 to 2014.