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Semiconductor industry executives are planning for a broad industry recovery in 2013, particularly in the second half of the year, according to a survey by audit, tax and advisory firm KPMG.
The $300 billion chip industry is the foundation for the $1 trillion-plus electronics industry. Semiconductor industry fortunes are a bellwether for the overall tech economy. The optimistic outlook is a contrast to a year ago, when chip industry executives surveyed by KPMG anticipated slower growth and showed less confidence. Three-quarters of 152 industry executives surveyed said that revenue growth will increase in the next year, compared to 63 percent a year ago.
About two-thirds expects their workforce to expand, up from just 48 percent a year ago. And 71 percent say annual industry profits will expand next year.
“Our survey findings bolster the belief that we will see the rebound beginning in 2013, with a gradual recovery picking up steam in the back half of next year,” says Gary Matuszak, global chair of KPMG’s Technology, Media and Telecommunications practice. “And unlike past recoveries, this one won’t be driven by wireless handsets and wireless communications alone, as other applications are becoming increasingly important revenue drivers, such as power management given the proliferation of wireless devices.”
The broadening set of significant semiconductor applications could be responsible for the shift in the importance of geographic markets, placing the U.S. ahead of China. For the third year in a row, fewer industry executives believe China will be the most important market for their company’s semiconductor revenue growth three years from today, while the U.S. market’s importance has increased. The U.S. and China markets are followed in importance by Europe, Korea, and Taiwan.
“The decline in Korea and Taiwan may be explained by their high exposure to the Japanese and China economies which are both in poorer condition than 2011,” said Matuszak.
Compared to a year ago, significantly fewer executives placed China among the top three markets for employee growth during the next 12 months, while more placed the U.S. and Europe among the top. Consumer applications of semiconductor chips have supplanted wireless as the big drivers for revenue over the next year. In addition, more executives than in the prior three surveys ranked industrial, medical, automotive applications, and power management as important revenue drivers.
“Semiconductors have become an enabling technology in many areas beyond traditional wireless and computing applications, such as mobile commerce and new features in automobiles,” says Ron Steger, global chair of KPMG’s Semiconductor practice. He adds that “we were not surprised at the increasing emphasis on power management, as the proliferation of wireless devices is making this the most important performance feature today.”
In the survey, 53 percent of the executives said renewal energy, such as battery technologies, will be an important driver of revenue over the next three years, up from 36 percent a year ago. More than three-quarters expect to expand research and development next year. Hot categories include near-field communications and radio-frequency identification chips.
KPMG conducted the survey in September. Half of the companies represented in the survey have annual revenue of $1 billion or more.
[Photo credit: KPMG]