Chip industry’s economic slump is over, report says

The chip industry always moves in economic cycles of upturns and downturns. VLSI Research, a respected chip industry market analyst firm, reports signs that the downturn of the past year is over and has shifted into an upturn.

Since chips are used in everything electronic, the sales forecast for the industry is a bellwether for all sectors, encompassing everything from sensors in advanced cars to smartphone sales.

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As you can see from the chart, VLSI weighs the relationship between sales (the blue line) and order activity. The company previously noted that the balance of supply and demand had shifted from saturation in the first quarter to a more balanced state in the second quarter. Now, as of data collected on July 13, there are signs of an upturn.

VLSI Research said that conditions have improved for pricing across the board — in memory, contract manufacturing (foundry), integrated device manufacturers, system-on-chip companies, and Internet of Things markets. Demand in China is particularly hot in the smartphone market. VLSI expects third quarter growth to hit 4 percent this year, compared to a year earlier. That’s not a huge upturn, but it will do.