SAN FRANCISCO, Calif. — Tis' the season for the semiconductor and electronics original equipment manufacturing (OEM) industries. After a year of slower growth, chip firms and OEMs set "to enjoy significant revenue growth in 2013" in more seasonal patterns, according to a Supply Chain Inventory market brief from IHS Inc.
IHS estimates that third quarter revenue for OEMs in six categories will reached $493 billion, up 7% from $462 billion in the second quarter and expects revenue to climb to $540 billion for 10% sequential growth.
"As the economy improves overall for 2014... those patterns will bring us back into what we have been considering to be more seasonal years," said IHS's Sharon Stiefel, senior analyst with semiconductor market intelligence, in an interview with EE Times. "Over last five years, ever since the great recession, we've had some atypical seasonality taking place in different quarters."
Stiefel added that the end of the year is stronger for OEMs compared to semiconductor component manufactures, which peaked most likely in the third quarter. OEMs saw a stronger fourth quarter because of seasonal electronics releases, such as Sony's PlayStation4 and the forthcoming Xbox.
Industrial electronics lead the six segments counted in the third quarter, but IHS estimates wireless communications, specifically tablets and handsets, will finish on top in the fourth quarter. The other OEM sectors counted were data processing, wired communications, consumer electronics, and automotive electronics.
"(Handsets and tablets) are not seeing saturation yet, they're still growing. We're seeing 4G and LTE, that technology is being brought to handsets so of course everyone will want to have the next handset that has 4G capability," Stiefel said, adding that consumers continue to purchase new tablets or refresh their current models. "That hasn't wained yet. We anticipate a time when some of those products might reach maturity, but we're not there yet."
Robust third and fourth quarter revenues can be attributed to inventory levels, according to an IHS release. Revenue growth in 2013 indicates that inventory levels tend to be inversely related to revenues just prior to, and following, periods of high demand; thus companies with anticipated seasonal holiday shipments (i.e. handset OEMs) most likely ramped up inventory in the third quarter to meet holiday demand in the fourth.
Wireless chip companies saw revenue peak in the third quarter, driven by OEMs ordering wireless chips for smartphones, tablets, and 4G wireless adoption. OEMs selling game consoles and handheld video game players are expected to enjoy a boost as new-generation players hit retail shelves after a seven-year period that did not see any major upgrades. Bloomberg reports that Sony sold more than 1 million PlayStation 4 consoles in North America during the first 24 hours the console was available.
Additionally, Windows 8.1 introduction in mid-October and releases of new laptop and tablet models strengthened PC OEMs and consumer electronics makers.
"As these growth patterns continue to be solidified over time, the things that cause the growth -- the underlying demand -- continue to come back to more normal demand patterns of consumer driven demand at end of the year," Stiefel said. "It's looking like 2015 will have even greater GDP growth according to sources at IHS that do economic forecast."
— Jessica Lipsky, Associate Editor, EE Times