2011: A Year of Two Halves for Power Industry

2011 was certainly a year of two very different halves. The first half of course started strongly, building on the momentum that 2010's recovery had brought. Power component companies certainly felt the effects of this tumultuous year. First half power semiconductor revenues exceeded $15bn; however, this was then followed by two quarters of declining revenues. Despite this weaker second half, 2011 was still a positive year for the power semiconductor industry. Power discrete revenues grew by 3% over the prior year. power IC revenues were broadly flat, whilst the power module market grew by nearly 18%. IGBTs and MOSFETs were the main drivers of growth for the discrete market. The automotive, industrial and lighting sectors all stood out as the most rewarding markets for power discretes last year, though this may well change in 2012. IGBT products also drove the majority of power module revenue growth in 2011 and exceeded $4bn for the first time. For the power module market, booming sales of motor drives was the key factor behind its impressive growth. Solar inverters which had previously been an important growth driver for power modules weakened considerably in 2011. The solar industry which had previously enjoyed triple-digit growth now faces much slower growth as governments pare back incentives for installations, and manufacturers suffer the effects of oversupply and collapsing prices as a result of massively oversized supplier base that had sought to capitalise on the renewable energy gold rush. 2012 is most likely to be another year of two very different halves for the power semiconductor market, starting with a weak first six months and finishing with a much stronger second - although the global economic outlook is yet again very uncertain. Many major countries' governments are still grappling with burdening sovereign debt issues and many of these countries look to be heading back into recession. Customers are continuing to tighten their belts resulting in what's projected to be a flat 1H (over 2011). Assuming the Euro-zone crisis gets resolved without any further significant fallout, we predict more robust sequential growth to resume in Q3 and quarterly power semiconductor revenues will rise above $8bn for the first time on record. However, total growth for the year is forecast to be just 5% in 2012, much lower than the historical results. The underlying factors behind the power component industry's growth still remain very positive however. Almost every end-sector now has an increasing focus on energy efficiency and energy savings which will help to continue to drive investment and growth for power components. Thus growth is not simply determined by increases in consumer and commercial spending and is likely to outpace growth of other component markets. Manufacturers may well experience a difficult and unpredictable 2012, but should take solace as double-digit growth is predicted to return to the industry in 2013 and the future remains very positive. Happy New Year and best of luck for a successful 2012! www.imsresearch.com