November 9, 2010 / 3:08 PM / in 7 years

Chip sector hopes for normality after end of boom

MUNICH (Reuters) - The semiconductor industry sees the end of a boom in demand for chips as providing predictability in earnings and production after a period of turbulence, top company executives said.

“This industry has gone through hell but it is looking very bright,” said Henri Richard, senior vice president of privately owned U.S.-based Freescale, at an industry event in Munich.

“We will walk into 2011 with a much more predictable situation,” Richard added.

Industry executives said they expect growth to be in a mid-high single digit range by the second quarter of next year.

“Our expectation for the semiconductor industry for next year is 5-10 percent growth,” Franco-Italian STMicroelectronics CEO Carlo Bozzotti said.

“We see a flattening of the semiconductor industry in Q4 and a glitch in the first quarter,” he added.

Chipmakers, whose products can be found in cars, PCs, appliances and energy technology, suffered through a slump in demand as companies drastically reduced inventories during the global financial crisis and in an effort to conserve cash hardly ordered new supplies.

That was followed by a surge in demand several quarters later as companies restocked, forcing the chip industry to quickly ramp up production trying to keep up with their customers. Now, after strong sales in early 2010 the industry is seeing tepid demand but industry executives welcomed the development with relief.

“What we are seeing in H2 is a return to normality,” Peter Bauer, CEO of German chipmaker Infineon‘s, said.

“There was a huge surge in demand in the first half that had no correlation to customer demand,” Bauer said.

He added that at present currency swings were a concern but that companies could do little to influence the situation.

“Currency development is what we have to deal with. Can we influence it? No. Can we complain? No,” Bauer said but urged governments to take action to keep currencies stable.

Both Bauer and Richard said sectors such as energy efficiency, health care as well as security would provide growth opportunities for semiconductor companies.

In addition, people of the generation which had never lived without the Internet were now coming into careers and thus into money, Richard said.

“That’s something that has not been factored in (to growth forecasts),” Richard added in regard to the growing popularity of mobile devices.

Looking back, Richard said those companies who made it through the downturn were those who did not scale back investments and kept up with innovation.

“We’re on a treadmill that never stops, if you blink you’re gone,” he said.

Editing by Louise Heavens

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