Semiconductor double digit growth in 2014 & 2015

The global semiconductor market was US$82.2 billion in the second quarter of 2014 according to World Semiconductor Trade Statistics (WSTS). 2Q 2014 was up 4.8% from 1Q 2014 up 10.1% from 2Q 2013. Healthy growth should continue into 3Q 2014. The table below shows initial revenue growth guidance for 2Q 2014, final reported revenue growth for 2Q 2014 and guidance for 3Q 2014 for key semiconductor companies. 2Q 2014 revenue growth versus 1Q 2014 was strong, with 13 of the 15 companies reporting positive growth. The best results were from Mediatek with 18% growth and Texas Instruments with 10% growth. In general 2Q 2014 showed better growth than initially expected. Of the 12 companies which gave 2Q 2014 guidance, 8 exceeded the initial estimate (shown with an upward arrow). The other 4 companies basically met their guidance.

Companies are guiding for continued quarter-to-quarter revenue growth in 3Q 2014. 11 of the 12 companies expect positive growth in 3Q 2014, ranging from 2% to 11%. One-third expect 3Q 2014 growth to be higher than 2Q 2014 and two-thirds expect growth to be lower. However based on most companies beating their guidance in 2Q 2014, the final 3Q 2014 revenue growth will likely exceed current expectations.

What is the outlook for the semiconductor market in 2015? Key semiconductor market drivers are generally expected to show improvement in growth rates in 2015 versus 2014. The International Monetary Fund (IMF) projects 4.0% GDP growth in 2015, up from 3.4% in 2014. Gartner expects combined unit shipments of PCs and tablets to grow 9% in 2015 versus 6% in 2015. Although IDC forecasts smartphone unit growth will slow to 13% in 2015 from 24% in 2014, Gartner expects total mobile phone unit growth to improve to 4.5% in 2015 versus 3.1% in 2014. Our forecast models at Semiconductor Intelligence predict 10% semiconductor market growth in 2014 accelerating slightly to 11% in 2015.

The chart below illustrates various semiconductor market forecasts for 2014 and 2015. The projections for 2014 range from about 7% (WSTS, Gartner, MIC and IC Insights) to about 10% (Mike Cowan, Future Horizons and Semiconductor Intelligence). Based on the latest WSTS data and company guidance, the final 2014 number should be around 10%. The projections for 2015 are much more varied. WSTS and MIC expect 2015 growth around 3%, about half of the 2014 percentage growth. Gartner and Mike Cowan see 2015 at around 5% growth. IC Insights expects 2015 IC growth of 7.5%. Our Semiconductor Intelligence 2015 forecast of 11% is towards the high end. The highest number is from Future Horizons, which expects 2015 growth of “15% or higher”.

If our semiconductor market growth rates of 10% in 2014 and 11% in 2015 are correct, it will market two consecutive years of double digit growth for the first time since 2003 to 2004. However the growth is nowhere near as strong as we have seen in peak growth years such as 37% in 2000, 28% in 2004 and 32% in 2010. Market growth rates in the low double digits are healthy, but not high enough to indicate excessive growth and a potential significant correction. Our preliminary outlook for 2016 is semiconductor market growth in the 5% to 9% range.