Is it downhill for the chip industry now? Wall Street thinks so (video)

The chip industry is starting to hit the skids, and the dramatic growth it saw in 2010 is likely to be a cyclical peak. In 2011 and 2012, growth is likely to stall, according to the Semiconductor Industry Association (SIA).

Ross Seymore, director of semiconductor research at Deutsche Bank, said that chip stocks have likely hit a peak along with the industry’s great sales, which are up about 32.8 percent this year, since stocks typically trade ahead of the actual fortunes of chip companies. He gave the remarks at the annual dinner for the SIA, the chip industry’s trade group.

“Unfortunately, what you all call a great year, Wall Street calls a peak,” Seymore said.

The third quarter was definitely weaker than expected, and the fourth quarter will probably be so as well. Bears started calling the peak of the current chip cycle as much as a year ago — way too early from Seymore’s view. The industry typically goes through a few years of growth followed by a year or so of contraction. But Seymore said he is optimistic that the coming downturn will be a light one. That means Wall Street will eventually bid the stocks upward.

“It will probably be more of a pause than a correction,” Seymore said.