International Data Corporation (IDC) has projected that global semiconductor revenues will be up by less than 1% in 2012, reaching about $304 billion. That is not good. The growth for 2013 is now being projected to be by 4.9% to $319 billion in 2013. The projection is for compounded annual growth of 4.9% from the years 2011 to 2016 to a final $368 billion in 2016.

The blame for such weak growth was on weakness in PC demand, DRAM and overall memory price deterioration. Other issues cited were inventory rationalization, global macroeconomic uncertainty, lower global GDP growth, a slowdown in China, the eurozone debt crisis and recession, Japan’s recession and fiscal cliff fears. Corporate IT spending also has affected global semiconductor demand this year.

Here is the 2013 Chip Forecast from 24/7 Wall St. looking for the winners and losers for investors next year.

The news is not all bad. Mobile chip sales have been strong due to demand for smartphones and tablets, and other bright spots have been in set-top boxes and automotive electronic systems.

IDC said that it now expects chip inventories to reach a balance with demand in the second quarter of 2013, and it expects that the growth will resume in the second half of 2013. Our problem with this is that its is based on today’s economics and not the economics of falling over the fiscal cliff. If the U.S. dips back into recession, then we fear that the growth projections being so back-end loaded will not materialize until 2014. IDC itself does use a lower but still positive global GDP growth in 2013, which we argue would be at risk if the fiscal cliff is not resolved and the U.S. falls back into recession.

FULL REPORT

JON C. OGG

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