Think quarterly, not annually, for better 2009 outlook, IC Insights suggests
"If you consider the worldwide economy and IC market on a quarterly basis instead of annual one, you can then begin to form a positive outlook about the 'other side' of this downturn, in the second half of 2009 and beyond," IC Insights President Bill McClean said.
By Suzanne Deffree, Managing Editor, News -- EDN, December 19, 2008
All indicators suggest that full-year 2009 will show a decrease in sales, but IC Insights this week offered that when viewed on a quarterly basis, a bottom and recovery period are highly likely to be encountered within the next nine months.
The market research company noted the more than $2 trillion in worldwide stimulus packages are coming into force next year. That, as well as falling oil prices and interest rates in the US, will help the global economy heal in 2009.
The research company further noted that the abrupt decline in the IC market in Q4 has many people comparing the current situation with the 2001 IC market. While the recent swift change from a positive to a negative IC market is similar to 2001, IC Insights believes that there are some significant differences, Bill McClean, president of the company, said in a statement Thursday afternoon.
"In 2001, the IC industry encountered the perfect storm of four negative influences, which included: a huge IC inventory build, excess IC industry capacity, a global recession, and a severe decline in electronic system sales. For 2009, IC Insights believes the IC industry is facing one of these same factors and a portion of another. In 2009, the IC industry will face a global recession and a decline in electronic system sales, but the decline in system sales next year is expected to be a single-digit decline as compared to a steep 14% decline in 2001," he said.
McClean continued to point to recent reports on excess semiconductor inventory levels, some of which have compared the levels expected in Q4 to the excess inventory level of Q1 2001. "It should be remembered that the semiconductor industry was at a $150 billion run rate in 2001. Thus, it would take a lot longer to burn off a similar amount of inventory in 2001 than in today's $250 billion industry," McClean said. "Moreover, in 2001, there were 945 million cell phone subscribers. Today, there are 4 billion cell phone subscribers! The semiconductor and electronics industries are much bigger and broad-based today than they were eight years ago."
McClean also noted that China's strength in the electronics market has grown significantly since 2001.
"With all of the comparisons between the worldwide economic recession of 2001 and the downturn in 2009, one key difference will be the positive economic force of China in this downturn that was not present in 2001," he said. "In addition to the economic stimulus that China will inject into the worldwide economy next year, the country has recently implemented a program to subsidize the purchase of cell phones and flat screen TVs (remember, China has the world’s largest base of cell phone subscribers)."
IC industry forecasts for next year call for a sales decline between 6% and 16%. Indeed, according to IC Insights, the market is forecast to decline by at least 10% next year. ISuppli also reported this week that it expects revenue to fall 9.4% from 2008 levels to $241.5 billion next year.
Examining the worst-case 16% decline scenario, IC Insights said that given the extremely low Q4 starting point and the low expectations for Q1 2009, if Q1 registered a 7% sequential IC market decline, followed by a 2% decline in Q2, a 15% increase in Q3, and a 5% increase in Q4, a year-over-year decline of 16% would result. "Thus, even when examining a gloomy full-year forecast of -16% for the 2009 IC market, one could still expect to see significant quarterly growth beginning in Q3 2009 and the second half of 2009 register a 17% increase over the first half of the year," McClean said.
"It should be noted that when using a low Q4 2008 starting point and assuming a weak Q1 2009, all annual IC market forecasts you see for 2009, down to about -18%, would realistically need to include a double-digit IC market rebound in the second half of the year as compared to the first half," he continued.
Given the typical seasonal strength in the electronics industry in the second half of the year, pent-up demand for electronics during the worst part of the global recession -- Q3 through Q2 2009 -- and a recovering worldwide economy, the second half 2009 IC market could surprise on the upside, IC Insights suggested.
"The best holiday gift we can offer you is the realistic expectation for a better business environment next year," McClean said. "If you consider the worldwide economy and IC market on a quarterly basis instead of annual one, you can then begin to form a positive outlook about the 'other side' of this downturn, in the second half of 2009 and beyond."
