Despite the uneven overall global economic recovery, semiconductor executives see their industry breaking the historical boom-and-bust performance trend with solid increases expected in 2011 in sales, and most importantly, workforce growth, according to a global survey conducted by KPMG LLP.
However, 53% of respondents anticipate the semiconductor cycle will peak within the next 12 months, reinforcing the inherent cyclicality of the industry. Historically, the semiconductor's industry's largest boom years are followed by sharp declines in the next year, yet, according to KPMG's survey of 118 senior semiconductor executives, the industry appears confident that continued product demand in 2011 will break that pattern, even as it follows a 2010 year that many analysts are forecasting as the third highest ever in the semiconductor industry.
In fact, according to the survey, conducted in collaboration with the Semiconductor Industry Association, 78% of semiconductor executives expect that revenue will grow by more than 5% next year, a sign of resiliency, as 87% of 2009 respondents projected similar revenue increases.
In looking at the jobs picture, 29% of the respondents predict workforce growth of greater than 5%, compared to 23% in 2009 and 17% in 2008 -- reflecting increased confidence in the resilient semiconductor industry.
"Our findings show an industry that expects moderate growth next year, which is extraordinary in the context of an uneven global economic recovery," said Gary Matuszak, KPMG Global Chair for the Information, Communication and Entertainment practice. "The continuing demand for electronic products ranging from tablets to smartphones, and an increased demand for technology integration in automobiles will buoy semiconductor manufacturers as the economy fluctuates."
KPMG's Semiconductor Industry Business Confidence Index, a measure derived from specific survey responses on revenue, capital spending, workforce change and R&D spending, registered 60 this year nearly matching last year's 61. An Index of 50 represents a neutral perception about the industry's prospects, and above 50 represents a positive perception, while below 50 represents a negative perception.
"The executives' confidence also appears to be fueled by recovering economies in a couple of key regions," said Ron Steger, Partner in Charge, KPMG Global Semiconductor Practice. "China still is viewed as most important for semiconductor product growth, but more executives also foresee the U.S. and European economies recovering and having important roles in industry growth."
- Reflecting the fundamental strength of the semiconductor industry, 39 of the industry executives expect their company's semiconductor revenue to increase by 10% or more in the next fiscal year, compared to 54% last year.
- Survey respondents also identified the top drivers of current revenue growth for 2011:
- 68% believe that current revenue growth will be driven by wireless handsets and other wireless communications devices
- 65% tabbed consumer products
- 55% identified computing
- Also, more executives believe industrial products (43% vs. 39% in 2009) and automotive products (38% vs. 30%) will be important revenue drivers over the next year.
- 37% of respondents anticipate profitability growth in excess of 5% for 2011, and a year ago 76% expected that level of growth for 2010.
- Although China is still considered to be the most important geographic area for semiconductor revenue growth three years from today (70% of respondents gave the highest rating of 8-10), KPMG's survey found that its significance has diminished slightly -- dropped from 78% last year. Conversely, both the U.S. and Europe appear poised to play a larger role in industry growth over the next three years, as 47% of executives gave the U.S. an 8-10 rating compared with a 42 % in last year's survey, and Europe increased to 30% in the this year's survey from 25% a year ago.
- 83% expect semiconductor R&D spending to increase in the next calendar year, with 47% saying it will be greater than 5%, compared to 72% and 45%, respectively, last year.
- 62% indicate a high or extremely high level of interest from customers for energy efficient and/or energy renewable products compared to 65% last year.