CHICAGO, Jan. 3, 2013 /PRNewswire/ -- Today, Zacks Equity Research discusses the U.S. Semiconductors, including Intel (Nasdaq: INTC), Texas Instruments (Nasdaq: TXN), Qualcomm (Nasdaq: QCOM), STMicroelectronics (NYSE: STM) and Micron Technology (Nasdaq: MU).
A synopsis of today's Industry Outlook is presented below. The full article can be read at
A number of factors, in combination, are bringing about a complete turnaround in the computing market. The near-term outlook is bleak for semiconductor manufacturers, with IHS iSuppli expecting sales to decline 1.9% this year. The negatives (tablet cannibalization, weaker-than-expected spending by both consumers and enterprises) are outweighing the positives (cloud computing, Windows 8) for now but things are expected to get better next year.
Emerging Markets, such as China, India, Brazil and Russia remain a positive for sector growth. However, this growth is coming at the cost of profits because of poorer purchasing power in these regions. Additionally, the macro weakness in developed regions is also impacting certain emerging markets.
With ultra-portable computing devices gaining popularity, the distinction between consumer and computing markets is blurring in some cases. Of course, the consumer electronics market also includes other gadgets such as LCD TVs, Blu-ray players and smartphones.
The Consumer Electronics Association ("CEA") expects global consumer electronics sales to be up 5.9% this year, driven by growth in tablets (up 83% from 2011), smartphones (up 24%), networked-enabled TVs (20%) and 3D-enabled displays (75%). A growing number of consumer electronic devices are now being sold into /factory-installed on automobiles.
IHS iSuppli is very positive about semiconductor sales into the communications market and expects both the wireless and wireline segments to make a positive contribution. Wireless is expected to be the stronger of the two, increasing 10.4%, with wireline relatively flat at 0.7%. Increasing data volumes across the world and infrastructure build-outs in emerging regions are positive drivers.
Industrial consumption of semiconductors is expected to be one of the strongest this year, driven by the need for production efficiencies, which in turn is increasing demand for power management semiconductor solutions. IHS iSuppli expects semiconductors for industrial applications to be up 7.7% this year, just slightly short of the 9.3% growth in 2011. Medical Devices (normally included in this segment) is an emerging area where semiconductor usage continues to increase.
The automotive end market is an emerging area for semiconductors. The growing electronic content within this market is a secular trend, as demand for safety, infotainment, navigation and fuel efficiency continue to increase. As a result, semiconductors serving this market should grow stronger than the industry over the next few years, although, we may see some changes in days to come, since nearly a fifth of vehicle production has moved to China and we may expect more to follow.
While 2012 started off well, conditions deteriorated for suppliers somewhat because of the protracted weakness in Europe and sluggish recovery in the U.S. Therefore, IHS iSuppli expects the market to grow just 2.7% for the full year, down from the 10.0% growth recorded in 2011.
The aerospace and defense markets are considerably dependent on government spending and policy making. The commercial aerospace market (which lags an economic downturn or recovery) has started looking up. Production increases should be slightly positive for the semiconductor industry this year.
The outlook for defense spending on the other hand is not encouraging, with focus remaining on intelligence systems and basic weaponry. Electronic weaponry remains a bright spot. So semiconductor manufacturers serving these markets continue to see mixed results, depending on the customers served.
Forecast for the Full Year
Semiconductor sales in the first half of 2012 remained below the level generated in the first half of 2011.
Overall, Semiconductor Industry Association (SIA) projections (based on WSTS data) places worldwide semiconductor sales growth at 0.4% in 2012 and 7.2% in 2013. The Americas region is expected to be up 3.2% in 2012, Japan 1.7%, Asia/Pacific 0.1% and Europe down 3.5%.
IHS iSuppi is even more negative about growth this year, expecting the PC market slowdown to result in a 0.1% decline in global sales.
The major players in the industry may be categorized into chipmakers (OEMs-whether fabless or otherwise), equipment and material suppliers and foundries.
According to estimates from IHS iSuppli, Intel (Nasdaq: INTC) and Samsung remained the top two semiconductor suppliers in 2011, while Texas Instruments (Nasdaq: TXN) overtook Toshiba Corp. to attain the number three position (helped by the National Semiconductor acquisition).
Renesas remained at number 5, followed by Qualcomm (Nasdaq: QCOM), which moved up from the ninth position in 2010. STMicroelectronics (NYSE: STM) remained at number 7, with Hynix and Micron Technology (Nasdaq: MU) is eighth.
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