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Semiconductors negative in 2016, positive in 2017

Semiconductors negative in 2016, positive in 2017
by Bill Jewell on 08-17-2016 at 12:00 pm

Note: the table and text below have been revised from an earlier post to correct the numbers for STMicroelectronics.

Semiconductor companies posted a wide range of results in 2nd quarter 2016. Intel, Micron Technology and Renesas Electronics all had declines in revenue in 2Q 2016 versus 1Q 2016. Samsung Semiconductor, Qualcomm and SK Hynix had double digit revenue growth. MediaTek posted the strongest growth, up 33% (in Taiwan dollars) driven by smartphones. The 2Q 2016 weighted average revenue growth of the companies providing revenue guidance for 3Q 2016 was 2%. World Semiconductor Trade Statistics (WSTS) reported semiconductor market growth in 2Q 2016 was 1%. The companies below are the top semiconductor suppliers. Broadcom, which recently combined with Avago, should be in this group but will not release 2Q 2016 results until September 2.

The guidance provided by these companies for 3Q 2016 is mixed, but in general shows improved growth. Qualcomm’s midpoint guidance was a 4% decline in revenue in 3Q 2016 compared to 2Q 2016, but the high end of its guidance was 2.6% growth. Renesas expects 3Q 2016 to be down 2% from 2Q 2016 in Japanese Yen, but should should show growth in U.S. dollars. Samsung Semiconductor and SK Hynix did not provide revenue guidance for 3Q 2016, but both companies expect solid demand growth in the quarter.

Intel, the largest semiconductor company, projects a 10% revenue increase in 3Q 2016 at the midpoint, with a 13.8% increase at the high end of guidance. Texas Instruments (TI), Micron Technology, and STMicroelectronics guided for revenue growth in the 5% to 6% range. However the high end of guidance for these three companies is in the 9% to 11% range. MediaTek expects 11.9% growth in Taiwan dollars. The weighted average in U.S. dollars of the companies providing guidance is 6% growth in 3Q 2016 from 2Q 2016.

Despite the strong outlook for 3Q 2016, the year 2016 semiconductor market will almost certainly decline from 2015. The first half 2016 semiconductor market was $157 billion, according to WSTS, down 6.4% from second half 2015 and down 5.8% from first half 2015. Second half 2016 would need to grow 13% from the first half to reach a 2016 market flat with 2015. Second half growth will probably be less than 10%, resulting in a 2016 decline. Recent forecasts for the 2016 semiconductor market range from a 3% decline (Gartner) to a 1% decline (IC Insights). Our forecast at Semiconductor Intelligence is a 2% decline compared to our May forecast of a 1% increase.

The deterioration of the electronics and semiconductor markets in 2016 is reflected in the table below showing IDC’s forecasts from March 2016 and June 2016. The June 2016 IDC forecasts cut about 2 percentage points of growth (or added 2 percentage points of decline) for PCs, mobile phones and smart phones.

The expected healthy increase in the semiconductor market in the second half of 2016 will set up 2017 market for growth. The current weakness in the global economy and electronics markets are expected to improve in 2017. The International Monetary Fund (IMF) July 2016 forecast calls for global GDP growth to improve from 3.1% in 2015 and 2016 to 3.4% in 2017. Recent forecasts for the 2017 semiconductor market are 2% from WSTS, 4.7% from Gartner and 6.1% from Mike Cowan. We at Semiconductor Intelligence have revised our 2017 forecast to 8.0% from our May forecast of 7.5%.