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Industrial semicon market defies market slump

Posted: 19 Aug 2013     Print Version  Bookmark and Share

Keywords:IHS  industrial electronics  Infineon  Analog Devices  Texas Instruments 

According to the latest report from IHS, the market for semiconductors used in industrial electronics applications logged a better-than-expected Q1 despite the threat of a dowturn. Global industrial electronics chip revenue in Q1 reached Rs.46,167.66 crore ($7.71 billion), up one per cent from Rs.45,688.62 crore ($7.63 billion) in 4Q12. Although the uptick seemed modest, the increase marked a turnaround from the three per cent decline in Q4. It also represents a major improvement compared to the three per cent contraction of the market a year ago in 1Q11, added the market analytics firm.

"The industrial semiconductor market's performance was encouraging, especially in light of continuing global economic uncertainty and the seasonal nature of the market, which typically sees slower movement in the first quarter of every year," said Robbie Galoso, principal analyst for electronics at IHS. "Some large segments of the industry, particularly avionics and oil and gas process-automation equipment, saw muscular double-digit gains, helping to drive up overall revenue."

In another positive development, several large industrial semiconductor suppliers also reported very lean inventories because of strong orders from customers. Infineon Technologies of Germany, Analog Devices of Massachusetts, and Dallas-based Texas Instruments all posted a sequential decline in industrial chip stockpiles as their days of inventory (DOI) measure fell well below average. Infineon achieved higher sales from increased volume in isolated-gate bipolar transistor (IGBT) chips; Analog Devices was strong in factory automation and medical instrumentation; and Texas Instruments saw growth in its analogue products.

Other companies reporting sound increases during the period were Xilinx of California for its test and measurement, military aerospace and medical product lines; and Microsemi, also from California, which likewise enjoyed expansion in medical electronics along with broad-based growth for the period.

However, the industry was not without its challenges, with the Eurozone crisis causing the most havoc.

"The financial troubles on the continent, particularly in Greece, Italy and Spain, had the effect of stifling growth as a whole, especially in the commercial market for building and home control," Galoso said. "As a result, the individual sectors for lighting, security, climate control and medical imaging were deleteriously impacted in Q1, compared to positive performance for those areas in 4Q12.

In contrast to Europe's woes was China, which displayed growth momentum and much-improved demand across a number of industrial end markets. Manufacturers like Siemens of Germany, Philips of the Netherlands, Swiss-based ABB and Schneider Electric of France said their Q1 sales in China improved from the earlier quarter.

In the rare earth industrial sector, however, China's hold on the market loosened as rare earth prices started going south this year. China had a more than 90 per cent monopoly on rare earth elements in the past, but new sources in Australia, the United States, Brazil, Canada and South Africa have opened up the market, decreasing dependence on China.

Products that incorporate rare earth materials include wind turbines, rechargeable batteries for electric vehicles and defence applications, including jet-fighter engines, missile guidance systems, and space satellites and communications systems.

The military and civil aerospace market had the most robust performance among all industrial semiconductor segments in the first quarter. Avionics was especially vigorous, driven by commercial aircraft sales from pan-European entity EADS Airbus and U.S. maker Boeing, up nine per cent and 14 per cent, respectively, on the quarter.

The oil and gas exploration market also saw solid revenue growth, with strong subsea systems and drilling equipment driving sales for ABB, Honeywell and GE.

In contrast to those high-performing segments, lackluster sales were reported in the markets for building and home control, for energy generation and distribution, and for test and measurement. One other market, manufacturing and process automation, reported stable growth, even though its sector for motor drives remained in negative territory.

For more statistics and forecasts, click here.

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