By Carlos Guillen
As I had estimated, semiconductor revenue grew by 32% in 2010; however, during the fourth quarter revenue declined approximately 4% quarter-to-quarter, but nonetheless reaching a record high. Looking back at estimates made a year-ago, I can say that no one was even close in predicting the type of growth seen within the semiconductor industry during 2010. Now, a similar situation may be occurring again as industry growth estimates for 2011 remain in the mid single digits, but I am sensing a continuous strengthening in sentiment.
According to SIA data, semiconductor revenue during 2010 reached a record high at $298 billion, up from the $226 billion recorded in 2009. While the 4% quarter-to-quarter decline was below seasonality, given the rumors of a surging inventory buildup and given the fact that PC consumption was slowing faster than previously expected, the fourth quarter decline was certainly not bad.
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The softness in PC sales that was experienced during the third quarter did continue into the fourth quarter, but to a lesser extent, negatively affecting demand for semiconductor components. On the other hand, demand for semiconductors is being offset by growth in a wider range of products that go beyond computers, such as smart-phones, tables, and industrial applications. Moreover, inventories for the most part appear to be in check. Semiconductor companies have become very quick at correcting inventory issues, particularly since everyone continues to be very concerned about macroeconomic factors.
So far during this earnings season, semiconductor companies are continuing to deliver better than expected revenues and earnings, but more than that, they are also indicating that growth will continue in 2011. Of course, the growth experienced in 2010 will not likely be matched in 2011, but still growth will continue, and for the most part managements' outlooks are signaling a stronger year for the industry than previously thought. This is very encouraging as continuing growth in this industry should certainly assist in the rehabilitation of the general economy.
All in all, the data coming in this earnings season is very compelling, and as a result I am increasing my semiconductor industry growth estimate for 2011. In fact, I now expect to see growth of 10 percent for the full year, up from my prior estimate of 4 percent. While March quarter revenue tends to sequentially contract by approximately 3.5 percent, I am currently seeing growth of 1 percent for this first quarter.
