The growth of the industrial electronics semiconductor market is set to fall short of previous expectations in 2012, as the business is buffeted by weakening global economic conditions.
Revenues for industrial semiconductors, used in a wide array of application markets from home automation to aeronautics and military purposes, is projected to finish 2012 at US$31.4 billion, up 3% from US$30.5 billion in 2011, said IHS. 2012's meager expansion contrasts with the solid 9% increase in 2011 and the exuberant surge of 35% in 2010 immediately after the recession. It also represents a significant downgrade from the previous forecast of 7.7% growth issued in July.
For the next four years (2013-2016), revenues for industrial semiconductors are set to rise in a range from 7% to 12% during each of the years, IHS noted. Revenues are forecast to reach US$44.8 billion by 2016.
"The chip revenue forecast was dialed back after economic headwinds got stronger in the second quarter, affecting several top semiconductor suppliers and original equipment manufacturers of industrial electronics," said Jacobo Carrasco-Heres, industrial electronics analyst at IHS. "And when hoped-for growth did not pan out as expected and sales eventually came out lower, the market was downgraded to reflect the changed circumstances."
Among the companies affected by the downturn in industrial semiconductors are Texas Instruments, Analog Devices, Infineon Technologies, Atmel, Fuji Electric and Linear Technology, IHS observed. Manufacturers that have lowered their 2012 outlook because of weaker orders include Danaher, Siemens, Bombardier, Agilent, Vestas and Johnson Controls.
Industrial semiconductors are used in many markets and applications. In energy generation and distribution, for instance, the chips are employed in wind turbines for renewable power, in inverters for photovoltaic solar energy, as well as in conventional oil and gas automation machinery. The semiconductors play an important role in military and civil aerospace, via applications in missiles and munitions, homeland security, satellites and avionics.
Other areas where industrial semiconductors are used include building and home control, covering security systems, lighting, smart meters and climate-control devices like air conditioners; medical electronics, including medical instruments, medical imaging and diagnostics; manufacturing and process automation, embracing motors and similar devices; and the test and measurement segment for a range of instruments, such as oscilloscopes and analog testers.
"The one segment that seemed to have remained untouched this year was the robust LED market, thanks to the LED lighting boom that has taken hold in many parts of the world," said Robbie Galoso, principal analyst for electronics at IHS.
Second-quarter LED sales for Philips climbed 37% from year-ago levels, and other LED lamp suppliers like Cree, LG Innotek and Samsung LED also enjoyed solid second-quarter results.
There were other manufacturers that performed well during the period, scattered throughout various segments, IHS said. Among them were Honeywell with 8% growth, driven by commercial avionics; General Electric with an industrial sales increase in the double digits, on the strength of a 27% rise in transportation; and Alstom, ABB, Delta and Mindray in other industrial sales segments.
Still, global economic concerns continue to trouble the industrial electronics industry as a whole. IHS noted. The financial worries of the euro zone, along with slower expansion in China and the ongoing high unemployment rate in the US, threaten to derail any growth anticipated in the future, especially if markets take a turn for the worse.
As a result, manufacturers in the space have issued a cautionary warning for the short term amid the generally lowered outlook for 2012, even though industry players remain hopeful that improved conditions could be on their way.