Japan disaster could boost 2011 chip revenue

Increase in memory prices could affect semiconductor industry

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

Supply disruptions caused by the March 11 earthquake and tsunami in Japan are expected to increase memory chip prices , upping year-over-year total semiconductor revenue growth to 7%, according to IHS iSuppli. The research firm had previously predicted that the industry would see a 5.8% growth rate over 2010.

iSuppli now expects global revenue from the computer chip industry to hit $325.2 billion in 2011, compared to the previous forecast of $320.1 billion.

The biggest factor in the upgraded forecast is an increase in the revenue outlook for dynamic RAM. The research firm now expects the DRAM industry will see a 4% revenue decline for the year, lower than the previously expected 10.6% year-over-year decline.

The change is due to an increase in average selling prices during the first quarter of 2011. And that, say iSuppli analysts, is largely because of 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 Mike Howard, a principal analyst at iSuppli, 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 with 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 again.

All eyes have been on Japan and its manufacturing abilities since the earthquake hit. As Japan deals with massive loss of life, a nuclear meltdown crisis, damaged roads, buildings and communities washed away, as well as rolling electrical brownouts and blackouts, its manufacturing and economic abilities have taken a major hit.

With Japan's technology business so intrinsically tied to the industry in the U.S. and around the world, the business effects of the disaster are expected to be wildly felt. Analysts have said that everyone, from the semiconductor industry to tablet makers, smartphone makers and even 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 .

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Sharon Gaudin

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