Analysts downgrade 2012 semiconductor market outlook

Sector to decline for first time since 2009 due to weakening global economic conditions, researchers say

Global semiconductor revenue is set to decline this year for the first time since the 2009 recession, according to a revised outlook from market research firm IHS.

The new report downgrades the company’s previous forecast, predicting a 0.1% contraction in global semiconductor market chip revenue this year. The company had previously forecast modest 3% growth in the sector.

The news follows a disappointing second quarter, when growth levels fell short of historical averages, and weak third-quarter expectations driven by deteriorating economic conditions. IHS cites the weakening market for PCs and related peripherals as key reasons for the decline, adding that growth in wireless communications will fail to make up for the shortfall, as previously expected.

The downgrade follows a report earlier in the month from market research firm IDC lowering its outlook for the PC market this year. IDC said it expects the PC market to grow just 0.9% this year, up just slightly from 2011 and marking the second straight year of growth below 2%.

IDC cited lower spending by both businesses and consumers along with anticipation over product upgrades later in the year as key reasons for the decline.

Said David Daoud, research director for personal computing at IDC: “The U.S. market will remain depressed until Windows 8 products hit the shelves in the fourth quarter of 2012. The industry is responding by reducing shipments of PCs and clearing Windows 7-based inventories to pave the way for a new generation of systems. But, as we move into the tail end of the third quarter, PC activity will continue to slow as demand drops. The third-quarter back-to-school season is also proving to be a challenging period, despite prices dropping to their lowest levels. We expect the year will end with shipments in the U.S. falling by 3.7%, marking the second consecutive year of contraction.”

Despite the weaker outlook for both PCs and semiconductors, IHS is predicting a rebound in the chip market next year. The forecast is for 9% growth in global semiconductor market revenue in 2013.

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