Chip industry sags before expected 2013 comeback, says Gartner

Worldwide chip revenue to hit $298B this year, down 3% from 2011

While an analyst firm is reporting that global semiconductor revenue has dipped 3% this year, the market is expected rebound in 2013.

Gartner Inc. reported this morning that worldwide chip revenue will hit $298 billion this year, a 3% drop from the $307 billion in revenue chipmakers brought in last year.

Although the industry was expected to stall in the first half of 2012, it was also expected show some growth in the second half of the year, leading to a recovery in 2013. That didn't not happen.

Third-quarter order rates, Gartner said, were below seasonal expectations. And forecasts for the final quarter of 2012 also envision declines.

Even so, the same analyst firm last week predicted that despite the sluggish 2012 performance, global chip revenue is projected to total $311 billion in 2013. That would represent a 4.5% increase over this year.

Gartner at one point had projected that chip revenue in 2013 would hit $330 billion. Economic factors and an inventory surplus prompted its more recent, lower forecast.

"Uncertainty about the state of the macro-economy, coupled with ongoing inventory overhang, sent ripples through the semiconductor industry," Steve Ohr, research director at Gartner, said in a written statement. "The hardest hit areas include the PC supply chain, memory, analog and discrete components. The PC business, ordinarily a growth driver, was on a negative slope for the first time in many years. PC production declined 2.5% in 2012."

Ohr also noted that the smartphone market, which has been extremely strong for many quarters, has begun to slow as it matures. Still, smartphones remained the strongest driver for semiconductor revenue growth in 2012.

Gartner's numbers echo a report released by analyst firm IHS iSuppli earlier this month. Its analysts downgraded their forecasts for the global semiconductor market this year; they now expect worldwide chip sales to decline 2.3% in 2012, from $310 billion in 2011 to $303 billion this year.

That marked the third time this year that iSuppli has lowered its semiconductor revenue forecast.

Today's report from Gartner noted that Intel -- the world's largest chip maker in the world -- is showing a 2.7% decline in revenue in 2012. And Gartner is laying the blame squarely on the struggling PC market, which has been hammered by a bad economy and consumers' increasing desire to spend their limited cash on tablets and smartphones instead of laptops and desktops.

Samsung Electronics, the second biggest PC maker, is showing a 8.7% decline in revenue this year.

However, Gartner reported that third-place Qualcomm is showing dramatic growth. Qualcomm, which moved from sixth place in 2011 to third place this year, showed 29.6% year-over-year growth.

Fourth-place Texas Instruments dipped 6.4% and fifth-place Toshiba is down 13.7% compared to last year.

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, on Google+ or subscribe to Sharon's RSS feed. Her email address is sgaudin@computerworld.com.

See more by Sharon Gaudin on Computerworld.com.

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