LONDON The global semiconductor market is likely to see a rise in annual growth in the next decade, to about 8 to 10 percent on average, due to the demands of environmental engineering on semiconductor technologies, according to Matthew Towers, CEO and founder of Intex Management Services Ltd. (Wellingborough, England), which trades as IMS Research.
These demands will be additive to those of the information and communications technology sectors, which semiconductors are already meeting and which were responsible for growth of 6 to 7 percent annual growth in the first decade of the 21st century.
"An 8- to 10-percent CAGR [compound annual growth rate] would take the annual chip market to about $550 billion to $600 billion by 2020," said Towers speaking to a conference organized by the Global Semiconductor Alliance in London. "That's better than the noughties but not a return to the golden age of the semiconductor industry. Green engineering could provide $60 billion to $70 billion in new semiconductor [annual] demand," Towers said.
The period 1970 to 2000 was marked by annual growth that varied between 10 and 15 percent with some even higher boom years as the integrated circuit revolution drove professional applications. "The IT and wireless industries drove double-digit growth for three decades," Business efficiency productivity improvements meant a premium could be paid for chips which in turn paid for the investment for further growth in chip manufacturing capacity, Tower said.
However, the last decade has demonstrated the consumerization of the electronics industry, he said, and this meant that semiconductor growth had been tied down to consumer demand growth. This has limited chip market growth potential to disposable income, which grows at only a few percent per year. It also drives margins down as there are no longer the same economic efficiencies to justify a chip premium.
Macro-economic trends are not much help either, Towers said. There is some population growth, particularly an emerging middle-class in the BRIC countries of up 670 million people by 2030. By then China will add 375 million "middle-class" high spenders, he said. One trend is that an aging population demographic, particularly in the developed world, will drive a need for medical electronics.
More strikingly progress in power efficiency and power management can produce cost savings that can justify price premiums and increasingly semiconductor technologies are being applied in industrial and professional environments such as photovoltaics, electric vehicles and lighting, Towers said.
However, the semiconductor sector will continue to suffer from the "bullwhip amplification" effect, which means that when small fluctuations occur in service and product demand, upstream suppliers have to react faster than the time-constants associated with the supply chains. The result is that a change in global GDP tends to produce a tenfold effect in the chip market and an even larger effect in the market for semiconductor manufacturing equipment, Towers said. "GDP projections are extremely positive for 2010 and 2011," Towers concluded.
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