Global electronic semiconductor revenue will improve in 2013

According to IHS iSuppli's Industrial Electronics Market Tracker, the sluggish global economy and poor performance of major semiconductor suppliers continued to erode the vitality of the industrial electronics market last year, resulting in a decline in overall operating income.

　　Industrial electronics semiconductor revenues were $30.5 billion in 2012, down 2.8% from $31.4 billion in 2011. This confirms initial forecasts of weak growth, but also highlights how dramatic the decline has been in this market, which grew 36.5% in 2010 and 9.7% in 2011.

　　However, with demand strengthening and a recovery expected in the second half of the year, the outlook will improve in 2013. The market is expected to continue to expand in the following years, with a compound annual growth rate of 6.3% from 2011 to 2017. By 2017, operating revenues will reach approximately US$45.3 billion, as shown in Figure 2.

　　
Figure 2: Global Industrial Electronics Semiconductor Revenue Forecast (in US$ billion)

　　As initial optimism faded and consumers turned cautious, semiconductor manufacturers and original equipment manufacturers (OEMs) fell into trouble last year. At the beginning of the year, the overall performance of the industrial electronics semiconductor market was dragged down by declines in manufacturing and process automation, energy generation and distribution, test and measurement, and building and residential control. In addition, the weak global economy caused the semiconductor industry to stagnate in the second half of the year.

　　By the third quarter, several markets that were expected to see strong sales growth had disappointing results. Several major suppliers had optimistic expectations for industrial electronics demand in the third quarter, but these expectations were ultimately dashed. At the same time, several major semiconductor suppliers reported decelerating sales growth in the Americas due to the impact of the US fiscal cliff.

　　The weak performance in the third quarter brought uncertainty to the fourth quarter. At that time, several companies in the industrial market supply chain warned of a bleak outlook for the fourth quarter. These manufacturers include Fairchild Semiconductor, Avago Technologies, ThermoFisher and Honeywell.

　　Some of these companies subsequently predicted continued uncertainty in 2013. Due to the worsening outlook and the deteriorating situation of industrial customers, Infineon plans to cut its planned investment by 100 million euros in 2013. More semiconductor companies are pessimistic about the near-term prospects for industrial sales, indicating that the current near-term visibility is the worst ever.

　　Only two areas, LED lighting and commercial avionics, have shown strong growth and will continue to do so. Philips and Samsung LED achieved double-digit year-on-year growth in LED sales in the third quarter, and other LED suppliers such as LG Innotek, Toshiba and Seoul Semiconductor also achieved high single-digit sales growth. The LED market is expected to peak next year, when annual LED sales will increase by more than 30% to $5 billion.

　　Commercial aviation sales also posted solid growth in the third quarter, as EADS and Boeing both posted double-digit growth. Other major OEMs, such as UTC and Honeywell, also saw strong growth in sales in the third quarter, driven by large airlift, business aircraft and helicopters.