10:02 AM

iSuppli: Largest Ever Demand In History For Chips Will Lead To Shortages, Will Affect Gadget Makers...

Market research firm iSuppli has boosted its revenue forecast for the global chip industry because of unprecedented demand for all types of electronics products, creating the largest growth in the history of the chip industry.

The 2010 forecast has been raised to 35.1% growth from iSuppli's previous forecast in May of 30.9%.

iSuppli: "With an $80.7 billion increase, 2010 will bring the largest annual expansion in semiconductor revenue in history in dollar terms. In comparison, semiconductor revenue increased by slightly less than $60 billion during the next best year for dollar chip growth: the dot-com-fueled year of 2000."

2010 is expected to result in global sales of $310.3 billion.

Dale Ford, senior vice president for iSuppli. "It's now apparent that semiconductor sales are getting an infusion of growth hormone in 2010 because of a number of factors, including rising prices, inventory buildups and richer chip content in key electronic products like smart phones and advanced LCD-TVs. All this is causing chip revenue to bulge to awesome dimensions this year."

The enormous boost in chip sales is different from that in 2000:

While the growth of 2010 is being compared to that of the year 2000, it is important to note that the nature of this cycle is completely different from the 2000 period. The booming growth of 2000 followed a strong expansion in 1999 and was driven by an unsustainable bubble of demand. That bubble popped in 2001 with a collapse of 28.6 percent. In contrast, the 2010 growth represents a recovery from a collapse in the prior year of 2009 and is forecasted to continue into 2011.

Chip shortages will occur because semiconductor manufacturers have been careful not to over-produce, which means inventories are low across many different types of chips.

This will make it more difficult for companies to compete against hot selling products such as Apple's iPad because they will have to pay more for scarce chips, and they won't be able to bring enough product to market.