(By Balachander) Global semiconductor revenue will shrink by the end of 2012 erasing last year gains due to pressure from a weak global economy, according to information and analytics company IHS Inc. (NYSE: IHS).
IHS projects semiconductor silicon revenue of $303 billion at the close of 2012, down 2.3 percent from $310 billion in 2011. The projected decline comes in contrast to the 1.3 percent gain made last year.
The firm also expects worldwide semiconductor revenue to drop by 0.7 percent in the fourth quarter compared with the prior quarter.
"With final numbers yet to come in, fears abound that industry revenue could decline even more than currently predicted in the fourth quarter, if economic conditions do not improve," IHS said.
"The global economy continues to be the most critical variable affecting the semiconductor space both this year and the next, especially because the chip industry is highly dependent on consumer spending," said Len Jelinek, chief analyst of semiconductor manufacturing at IHS. "And until consumers believe their financial position is stable or improving, consumer spending will likely remain soft."
However, IHS expects silicon shipments to climb tentatively late in the first quarter, when companies achieve equilibrium between inventory and demand.