Chip market could fall by 5% in 2012, says ABI

LONDON – Market researcher Allied Business Intelligence Inc. has decided that a lack of confidence in the global economy and a past lack of investment in semiconductor manufacturing mean the chip market will continue to be soft in the second half of 2012.

ABI Research said that lack of 28-nm manufacturing capacity for Qualcomm is likely to continue for a number of months and would limit sales and therefore the global market.

Global chips sales in the first half of 2012 were $142.96 billion, 5.1 percent down on the $150.59 billion sold in the first half of 2011. ABI predicts that wil continue in the second half of 2012 and produce an overall market decline for 2012 of up to 5 percent.

The conventional wisdom had been that inventories were being consumed in the first half of the year and would give rise to a better second half year. However, ABI considers that as inventories are burnt and order books become less predictable, the ability to bounce quickly on any upturn will be limited. Upcoming debt ceiling decisions in the U.S., U.S. presidential elections, the Euro debt crisis, and the lack of availability of credit facilities are likely to create a situation whereby manufacturing and semiconductor production are squeezed through the end of 2012 and into the middle of 2013, the firm said.

"Semiconductor suppliers continue to try to cut to profitability, hoard cash and explore limited M&A [merger and acquisition] strategies to buy volume in markets where cash in the bank is worth more to investors than long term product strategy," said Stuart Carlaw, Chief Research Officer for ABI Research. "Any upswing in consumer appetite for spending is unlikely to be met by a supply chain that will be very thin by the middle of next year."


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