We expect continued strong demand for the sector, as its chips are needed to fuel the growing mobile, cloud, video and other trends.

The semiconductors sector continued to enjoy the highest YOY growth rates of any sector in four important KPIs for 1Q 2011, powered primarily by chips for smart mobile devices and servers.

Highest growth in four important measures

The semiconductors sector had the highest growth, on a trailing 12-months basis, in median sales (59%), operating income (98%) and operating margin (53%). The sector also had the highest YOY growth rate in median cash and investments (35%).

Communications chips remained a key strategic focus for sector companies, as exemplified by three of 1Q 2011's top 10 largest M&A transactions by dollar value. Chips for servers also continued to boom in the quarter.

However, the sector also posted the highest YOY growth rate in median inventory (43%), putting it at risk should demand diminish.

Key performance indicators for semiconductors (median value), 1Q11

Outlook for semiconductors

Growth rates should continue to moderate as they are compared with increasingly stronger year-ago periods. However, we expect continued strong demand for the sector, as its chips are needed to fuel the growing mobile, cloud, video and other trends.

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