Japan disaster could boost 2011 chip revenue

Increase in memory prices could affect semiconductor industry (see video below)

The disaster in Japan may result in a boost to worldwide semiconductor revenue, according to analysts.

Supply disruptions caused by the March 11 earthquake and tsunami in Japan are expected to lead to an increase in memory chip prices, and that increase could in turn boost the rate of year-over-year growth in overall semiconductor revenue, according to IHS iSuppli. The research firm had previously predicted that the semiconductor industry would see 5.8% revenue growth from 2010 to 2011, but now it's upping that forecast to 7%.

ISuppli now expects the computer chip industry's global revenue to hit $325.2 billion in 2011; its previous forecast was $320.1 billion.

The biggest factor in the upgraded forecast is an increase in the revenue outlook for dynamic RAM. The research firm had previously expected the DRAM industry's overall revenue to decline 10.6% year over year, but now it expects that decrease to be just 4%.

The change is due to an increase in average selling prices during the first quarter of 2011. And that increase, according to iSuppli, can be largely attributed to supply disruptions caused by the earthquake and tsunami.

"The earthquake will result in a 1.1% reduction in global DRAM shipments in March and April," said iSuppli analyst Mike Howard in a statement. "This reduction, along with other factors, contributed to a steadying in contract prices for DRAM in March, which typically is a weak month for sales, when prices were expected to decline by as much as 3%. The impact of the prices holding steady during this period is dramatic and will represent a major boost for DRAM revenue for the entire year."

This is a new take on the effect that the disaster in Japan is having on the worldwide chip industry.

Last week, analysts at iSuppli said that no other disaster has hurt the global semiconductor industry more than last month's earthquake and tsunami in Japan.

And it could be four to six months before semiconductor production fully resumes in Japan, said Dale Ford, a senior vice president at iSuppli, last week. He also said that a few of Japan's production facilities are so badly damaged that they may never come back online.

All eyes have been on Japan and its manufacturing abilities since the earthquake hit. The country's manufacturing and economic abilities have taken a major hit as its people deal with massive loss of life, concerns about a nuclear meltdown, electrical outages and the destruction of roads, buildings and entire communities.

The business effects of the disaster are expected to be widely felt, since Japan's high-tech industry is so tightly connected to the high-tech sectors of the United States and other countries all over the world. Analysts have said that all kinds of IT-related businesses -- from semiconductor manufacturers and makers of tablets and smartphones to companies throughout the automotive industry -- could be affected for the next six months to a year.

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, or subscribe to Sharon's RSS feed . Her e-mail address is sgaudin@computerworld.com.

Copyright © 2011 IDG Communications, Inc.

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