Despite the enthusiasm, though, 53 percent of respondents anticipate the semiconductor cycle will peak within the next 12 months, reinforcing the inherent cyclicality of the industry.
Historically, the semiconductor's industry's largest boom years are followed by sharp declines in the next year, yet, according to KPMG's survey of 110 senior semiconductor executives, the industry appears confident that continued product demand in 2011 will break that pattern, even as it follows a 2010 year that many analysts are forecasting as the third highest ever in the semiconductor industry.
In fact, industry observer iSuppli, now part of IHS Inc., reported this week that the global semiconductor market will achieve the largest dollar increase in its history in 2010, courtesy of a boom in DRAM and NAND sales that is benefiting memory suppliers.
A preliminary forecast from iSuppli shows that worldwide semiconductor revenue will amount to $304 billion in 2010, up from $229.5 billion in 2009. This represents growth of 32.5 percent for the year. Percentage growth was higher in 2001 than in 2010, when revenue rose by 36.7 percent. However, revenue increased by $74.5 billion in 2010, a record increase that shattered the previous benchmark expansion of $59.2 billion in 2001.
"While many observers expected the semiconductor industry in 2010 to achieve a solid rebound following the deep drop of 2009, the actual growth far outstripped all expectations," said Dale Ford, senior vice president for market intelligence services for iSuppli. "The enormous expansion in semiconductor revenue was based on renewed demand for electronic equipment, such as computers, televisions and cell phones."
Ford added, however, that semiconductor sales in 2010 are set to rise at more than three times the rate of electronics equipment revenue. "This augmented growth is being driven by a range of multiplying factors, including inventory rebuilding, upward price pressure due to a supply/demand imbalance and an increase in the average semiconductor content of major electronic products," he said.
Moderate Growth Ahead
According to the KPMG survey, conducted in collaboration with the Semiconductor Industry Association, 80 percent of semiconductor executives polled expect that revenue will grow by more than 5 percent next year, a sign of resiliency, as 87 percent of 2009 respondents projected similar revenue increases. In looking at the jobs picture, 29 percent of the respondents predict workforce growth of greater than 5 percent, compared to 23 percent in 2009 and 17 percent in 2008 — reflecting increased confidence in the resilient semiconductor industry.
"Our findings show an industry that expects moderate growth next year, which is extraordinary in the context of an uneven global economic recovery," said Gary Matuszak, KPMG global chair for the Information, Communication and Entertainment practice. "The continuing demand for electronic products ranging from tablets to smartphones, and an increased demand for technology integration in automobiles will buoy semiconductor manufacturers as the economy fluctuates."
"The executives' confidence also appears to be fueled by recovering economies in a couple of key regions," said Rod Steger, partner in charge at KPMG Global Semiconductor Practice. "China still is viewed as most important for semiconductor product growth, but more executives also foresee the U.S. and European economies recovering and having important roles in industry growth."
Revenue and Profit Growth
Reflecting the fundamental strength of the semiconductor industry, 40 percent of the industry executives expect their company's semiconductor revenue to increase by 10 percent or more in the next fiscal year, compared to 54 percent last year.
Survey respondents also identified the top drivers of current revenue growth:
- Sixty-seven percent believe that current revenue growth will be driven by wireless handsets and other wireless communications devices;
- Sixty-four percent tabbed consumer products;
- Fifty-five percent identified computing.
Also, more executives believe industrial products (43 percent today versus 39 percent in 2009) and automotive products (39 percent versus 30 percent) will be important revenue drivers over the next year.
The expected profitability growth for 2011 reflects continued confidence in industry fundamentals, but a less bullish view than last year's survey. Thirty-eight percent of respondents anticipate profitability growth in excess of 5 percent for 2011, and a year ago 76 percent expected that level of growth for 2010.
Future Geographic Growth
Although China is still considered to be the most important geographic area for semiconductor revenue growth three years from today (70 percent of respondents gave the highest rating of 8-10), KPMG's survey found that its significance has diminished slightly, dropping from 78 percent last year and 79 percent in 2008. Conversely, both the US and Europe appear poised to play a larger role in industry growth over the next three years, as 49 percent of executives gave the US an 8-10 rating compared with a 42 percent in last year's survey, and Europe increased to 31 percent in the this year's survey from 25 percent a year ago.
In this year's findings, more executives (83 percent) expect semiconductor R&D spending to increase in the next calendar year, with 29 percent saying it will be greater that 5 percent, compared to 72 percent and 23 percent, respectively, last year.
The KPMG semiconductor industry survey results show that 53 percent of respondents anticipate the semiconductor cycle will peak within the next 12 months, which is somewhat contradictory to the responses received in the areas of revenue and profitability growth.
Sixty-two percent indicate a high or extremely high level of interest from customers for energy efficient and/or energy renewable products compared to 65 percent last year.
KPMG's study, conducted in collaboration with the Semiconductor Industry Association in September and October, surveyed 110 senior level executives in the semiconductor industry including device, foundry and fabless manufacturers.