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Components | September 04, 2012

'Good' growth years have star performing 2Q

IC Insights analyzed the typical pattern of sequential quarterly IC market growth rates during a calendar year, a phenomenon usually referred to as “seasonality.”
When averaging the quarterly IC market growth rate figures over the past 30 years, the third quarter average increase was the highest at almost 6%. In contrast, the average sequential growth rate during the first quarter of the past 30 years was -1.4%. When using 10% annual growth as the breakpoint for defining “good” and “poor” IC market years, the average quarterly growth rates since 1983 change dramatically. Over the past 30 years, the number of poor growth years (including 2012) is expected to outnumber the good growth years by two, showing a 16-year/14-year split, respectively.

It is interesting to note that in the 14 “good” growth years (i.e., 1983-1984, 1986-1988, 1992-1995, 1999-2000, 2003-2004, and 2010), the second quarter of the year typically registers the highest sequential quarterly growth rate. This is somewhat of a surprise as the third quarter typically comes to mind first when thinking about the strongest seasonal quarter. As shown, third and fourth quarter average sequential growth rates slow from the second quarter peak but are usually still very healthy during good growth years. Even the first quarter’s sequential average growth rate is positive (3.1%) in years with a good growth rate.

In the 16 “poor” IC market growth years (i.e., 1985, 1989-1991, 1996-1998, 2001-2002, 2005-2009, and 2011-2012), the first half of the year typically takes the brunt of the slowdown. As shown, the second half of the average poor growth year usually rebounds from the first half IC market downturn. For 2012, the first quarter is the only quarter that is expected to display negative sequential growth and the 2H12/1H12 IC market is forecast to register a 10.5% increase, about equal to the past 20-year 2H/1H average growth rate.

The 3Q/2Q IC market growth trend line has been on an upward slope since 1983, indicating that the IC market is becoming increasingly dependent upon the seasonal growth in the third quarter of the year. With the slow shift of electronic systems sales from businesses to consumers over the past 30 years, it makes sense that IC market is becoming stronger in the second half of the year and the third quarter in particular.

It should be noted that the two biggest markets for ICs (i.e., PCs and cellphones) are both highly seasonal and now usually register noticeable second half of the year strength (an analysis of the cellphone and PC markets is presented in IC Insights’ IC Market Drivers Report). Moreover, when one factors in the typically strong consumer IC sales ahead of the holiday shopping season, the total IC market is likely to continue its recent pattern of strengthening third quarter seasonality.

In contrast to the trend of increasing IC sales in the third quarter of the year, fourth quarter sequential IC sales growth has been on a downward slope since 1983. In fact, the trend line for fourth quarter sequential growth moved into negative territory beginning in 2007. However, the expectation for the introduction of new electronic system products (e.g., smartphones, tablet PCs, and Ultrabooks) beginning in late 3Q12 is forecast to help 4Q12 IC sales increase sequentially by 3% this year.

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