[LONDON] Strong demand for smartphones and automotive electronics has boosted growth for the semiconductor industry this year, as a global industry association said results for 2014 were set to have beaten forecasts with further modest growth expected.
Even Microchip Technology, which sent shudders through global markets in October by warning of a coming industry downturn, now says business is proving to be better than previously expected and sales should return to quarter-on-quarter growth early next year.
Industry body World Semiconductor Trade Statistics said on Tuesday it now expects world chip markets to grow 9 per cent in 2014 to US$333 billion, driven mainly by double-digit growth in demand for memory chips and components used in cars.
Meanwhile SEMI, a second trade group that represents makers of production tools and testing equipment used by chipmakers to build their own products, raised its 2015 outlook but trimmed its growth forecast for 2014 and predicted a flat 2016.
The forecast by the WSTS of 9 per cent growth for 2014 for world semiconductor markets was significantly higher than the 6.5 per cent growth it had predicted in June.
The group also said it expects the chip market to rise 3.4 per cent in 2015 to US$345 billion and 3.1 per cent to US$355 billion in 2016, assuming a further recovery in the global economy.
French broker Bryan Garnier said the revised outlook suggests higher than expected growth for 2015 but a dip in WSTS's forecast for 2016.
SEMI now predicts sales of chip equipment to rise 19.3 per cent to US$38 billion instead of the 20.8 per cent to US$38.4 billion that it predicted in its last market forecast in July.
But the trade group expects significantly stronger growth in 2015 of 15.2 per cent to US$43.76 billion, up from the 10.8 per cent forecast it previously made for sales of production equipment next year. However, it cautioned that 2016 sales were expected to dip slightly to around US$43.68 billion.
Microchip said on Tuesday it now expected a more modest decline in net sales in the quarter ending this month and sees a return to quarterly sequential revenue growth for the quarter ending in March.
Chief Executive Steve Sanghi said the company has seen an improvement in bookings and billings since October. "We are now even more confident that the small correction that we experienced in the September quarter is behind us," he said.
In October Microchip sparked a global sell-off in technology stocks with a warning that a broad-based industry downturn, or correction, appeared to be underway, based on its weak September sales, especially in China.
Subsequent reports from other semiconductor makers during the third-quarter earnings season suggested Microchip's problems were confined to certain commodity chip segments rather than indicating a broader global slowdown in economic growth.
Semiconductor share indexes, which had been enjoying an upbeat year, fell on the Microchip warning, but have since rebounded to new highs. The 30-component Philadelphia Semiconductor Index of global chip stocks, which fell 16 per cent on the October fears, has rallied and is now up 27 per cent so far this year.