A veteran Wall Street analyst projects the semiconductor industry will snap back to typical growth levels next year after a slight contraction this year. Other market watchers also see a better year ahead, but project a flat or slight uptick this year based on a bump in PC and memory demand.

The chip sector could expand by 5% in 2017 after shrinking about 1% this year, wrote Ross Seymore of Deutsche Bank in a new report. The data center will be the fastest growth segment next year, rising 10%, followed by automotive at 9% and communications at 7%, he forecasted.

PCs will be the big drag on 2017, declining 2%, with consumer and industrial markets growing at about 4% in line with the overall industry, he estimated, with possible upside from emerging markets in drones and virtual reality. Most of the growth will come in the first half of 2017, he added.

The latest projections from the World Semiconductor Trade Statistics (WSTS) group are more moderate. It projects 2016 nearly flat at sales of $334.953 billion, down just 0.06% from 2015. It projects sales in 2017 and 2018 to be up 3.3% and 2.3%, respectively.

Figures provided by analyst Mike Cowen (below) suggest May was the trough of the year, down 6.2% with business picking up steadily since then. Cowen’s own estimate is that sales will be down 0.48% this year and up 4.66% in 2017.

In January predictions for chip growth diverged widely among market watchers from -3 to 4+%. Some forecasters brought projections down during the early part of the year as companies reported poor results, then brought them up again as the year brightened in the fall.

Seymore of Deutsche Bank predicts the industry will take a rest from mergers in the first half of next year following “several large, landscape-changing deals” in the past several months such as Qualcomm’s bid for NXP. The M&A activity drove semiconductor stocks to their “best 2H relative performance in well over a decade,” he said.

Beyond 2017, the Trump administration's expected effort to reduce U.S. corporate taxes could have a significant impact for a handful of chip makers, Seymore wrote.

Intel, Texas Instruments and Linear Technology, now merging with Analog Devices, face “the greatest potential benefit given their comparatively high rates” while Linear/ADI and Nvidia would most likely benefit from repatriating cash from overseas “given their significant offshore cash balances,” he wrote.

By: DocMemory
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