IBISWorld : Outsourcing to lower semiconductor revenues
A trend of outsourcing production to foreign third parties will continue to negatively affect industry revenue, as it has in recent years.
On a positive note, product sales to industrial markets are anticipated to rise due to increasing investment in automation, increased sales in consumer electronics and the widespread adoption of energy-saving techniques.
For these reasons, industry research firm IBISWorld has updated a report on its "Semiconductor and Circuit Manufacturing" report.
According to IBISWorld industry analyst Andrew Krabeepetcharat, total US demand for semiconductors and related devices will be worth an estimated $96.1 billion in 2013, with imports satisfying 47.3 percent of domestic demand.
Semiconductor and Circuit Manufacturing industry revenue is expected to increase at an annualised rate of 1.9 percent to $78.2 billion in the five years to 2013.
Industry revenue is expected to fall in 2013, however, as demand for US-made semiconductors shrinks due to more efficient, lower-cost alternatives abroad.
"During the five years to 2013, production outsourcing and price reductions have hampered revenue growth," says Krabeepetcharat. "Declines were exacerbated by the recession and the consequent decline in demand for computers and consumer electronics."
Downstream demand from domestic computer manufacturing, for example, has fallen at an annualised rate of 7.4 percent in the five years to 2013, thus reducing the US semiconductor and circuit manufacturing industry's revenue.
The average unit selling prices for industry products will continue to decline and players will increasingly outsource semiconductor and related-device production to overseas third parties.
As US computer manufacturers continue to offshore production and face heavy competition from international manufacturers, the domestic semiconductor and circuit manufacturing industry will follow a similar pattern.
And, as manufacturing technology continues to improve, manufacturers will likely phase out existing plants to be replaced by newer facilities.
Industry concentration for the US semiconductor market is increasing because there is a trend for larger participants to acquire smaller companies that have fewer resources; however, the trend off offshoring may reduce the advantages of scale enjoyed by vertically integrated designers and manufacturers.
Although major players in the industry are expected to continue to expand market share, most industry players are small, specialising in a small number of product lines to serve niche markets.
This industry includes firms engaged in manufacturing semiconductors and related devices and parts. Examples of products within this industry include: integrated circuits, memory chips, microprocessors, diodes, transistors and other optoelectronic devices.
