Semi revenue to decline 20% or more in 2009, three research houses report
In a trio of negative reports, Gartner, IDC, and In-Stat estimate semiconductor industry revenue will fall between 20% and 33% this year, with modest growth returning in 2010.
By Suzanne Deffree, Managing Editor, News -- EDN, February 25, 2009
Revenue for the semiconductor industry is set to decline 20% or more, Gartner, IDC, and In-Stat* have all reported this week.
The trio of reports separately came from each of the research houses as industry layoffs, weak demand and oversupply, and manufacturing operation shutdowns continue to plague the chip industry. Indeed, both Micron and Spansion announced job cuts as the week kicked off.
All three companies point to the global recession as the main reason behind the expected near-record semiconductor sales drop.
Gartner's estimate called for the steepest revenue decline at 24%, a significant change from its December 2008 forecast then calling for a 16% decline in revenue for 2009.
"We believe that the financial crisis has reset the semiconductor market,” said Bryan Lewis (pictured), research VP at Gartner, in a statement. “After the 2001 recession, in which semiconductor sales plummeted by a record 32.5%, semiconductor sales took about four years to get back to 2000 levels."
Gartner estimated that worldwide semiconductor revenue will fall by at least 17% sequentially in Q1 and warned that there is a "strong possibility that the first quarter of 2009 could be worse, and if the market continues with moderate declines in the second and third quarters of 2009, the industry could face a record annual decline."
On that, Gartner said its negative scenario estimate forecasts a 33% sales decline in 2009 and made specific note of the DRAM segment as a wildcard in the semiconductor forecasts for 2009. According to Gartner, DRAM suppliers lost more than $13 billion in 2007 and 2008. As well known, some DRAM companies, including Qimonda, are starting to go bankrupt and other leading suppliers are substantially reducing supply. Gartner said this reduced supply should lead to significant price increases in the second half of 2009.
“Semiconductor suppliers should prepare for Gartner’s negative scenario of a 33% decline in 2009 revenue,” Lewis said. “Tight control of expenses is essential, but suppliers should reconsider dropping their overall research and development budgets because focused R&D investments in the recession will help determine the winners in the upturn. Outsourcing and partnerships can help companies get the most from their R&D budgets.”
| Gartner | 22% to 33% |
| IDC | 22% |
| In-Stat | 20% |
IDC estimates call for a 22% sales decline this year, following a 2% decline in 2008. IDC noted that the abrupt slowdown will not only affect the United States and Europe, but also Japan and Asia/Pacific regions.
The research company said in its report that the damaged DRAM and NAND markets will stabilize by the second half of 2009, but revenue growth will not return to the markets until 2010. The research company also said that the dedicated foundry market will remain unstable through the first half, as utilization rates bottom by the middle of the year and then gradually recover. IDC further said that capital spending declines of more than 45% are expected in 2009.
With the lowest decline estimates, In-Stat reported that semiconductor revenues will fall 20% this year to $199.2 billion. According to the Scottsdale, Ariz-based company, the downturn is expected to be deep enough and long enough for semiconductor capacity to ultimately fall, as a result of mergers, acquisitions, bailouts, restructuring, and other industry realignments.
“Declining confidence resulting from recent shocks and increased uncertainty about the future will lead to more conservative spending even after liquidity improves and the economic recovery is well under way,” said Jim McGregor (pictured), an In-Stat analyst, in a company statement. “Restoring consumer and business confidence and overcoming excess capacity will be key to recovery and subsequent growth.”
While not anticipating a full recovery from the estimated decline scenarios, all three of the research houses expect sales growth to return in 2010.
"The semiconductor market, which is tightly correlated to GDP, will not reach an inflection point until GDP rises and consumer spending rebounds," said Brianne Lovett, research manager for worldwide semiconductor market forecaster at IDC, in a company statement. "The semiconductor market will begin to stabilize at the end of 2009 and improve in 2010 with a positive growth rate. However, the market will not rise to the levels seen in 2007 and 2008, until beyond 2011.”
IDC further reported that the macroeconomic factors will bottom at the end of 2009 and won’t recover until mid 2010. The company also said that the United States will lead the worldwide recovery.
Meanwhile, Gartner estimated 7.5% growth in 2010, followed by additional growth through 2012. The company pointed out that even with three years of increased revenues, however, the semiconductor industry will fail to return to 2008 revenue totals. In 2012, the worldwide semiconductor revenue is projected to reach $253.4 billion, still below 2008 revenue of $256.4 billion, according to Gartner's forecast.
Lastly, In-Stat estimated revenue growth in 2010 will be around 11.8%.
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Here is how Spansion has worked over the past 8 months or so -
June - lay off. Nothing major but some trimming here and there.
Oct - Employees pay cut 5%, VP's 10% - tighten belt for an April deadline
Dec - crazy email from CEO, cuts not working - all of us get 20% pay cut/4 day work week. "We're all in this together" left out that upper management who has made all the horrible decisions didn't increase to 20% cuts.
Jan - CEO forced out. Good, he was not a leader. That was on Friday with announcement long search for a new CEO to lead us from the ashes. The very next Wed - Hi I'm your new CEO John "the Hatchet man" Kispert email...we got his "as you already heard" email but we sure hadn't heard. Way to go weak HR.
Feb - employees find out they loose their job by the early deposit of their last paychecks. People figure it out quick when they get a deposit and some others don't. Worst move yet by Spansion, they are retarded head to toe. Monday the 23rd 35% of WW workforce walked. People with 25 years in company get no pension just the days they worked the previous week and 4 months of benefits.
Tuesday 24th news break Spansion rewards upper management with 100% salary for retention reasons. These are the same weak leaders who dropped the stock from $15 to $1.00 over the past 3 years (economy knocked it down to $.05). Employees are furious, especially since those left have to do at minimum 1/3 more work in 4 days and managers are telling them to "put all the bad behind us, we've got a new road ahead" yet that road is on blind faith. Also we saw how those who stuck it out this far got rewarded - no package etc...
March - Monday the 2nd - Bankrupt Chapter 11. Along with rumors of a second lay off and a merger as soon as within the next week (a flub by upper manager on a call reporting the bankruptcy to the company). More "hang in there" from managers who get 100% of their salary. Complaints are met with strong reaction by local VP's (at 100% salary) to put a cork in it.
FYI Bankruptcy negates the 4 month benefits offering to those just laid off. They have no legs to stand on a class action law suit and Spansion knows it. They don't care. Spansion only cares about maintaining salary for the dumb managers that caused most of these problems. New CEO is a joke. Unqualified and uncaring how he treats people at Spansion.
Spansion managers say "we're all about communication" but when questions are asked they are not really answered or completely ignored.
Only hope is if company who buys Spansion fired every single manager mid level on up. Incompetence is rampant.
Noleadership in Sunnyvale - 2009-2-3 18:30:00 PST -
In Processor.com "outlook good for managed service providers". AIM predicts 20% growth in 12 months.
I'll bet Gartner, IDC, In-Stat failed to talk to the people building the systems and networks.
Because Gartner, IDC, In-Stat only talk to the top 5 guys. these guys have a great rear-view mirror but cannot forecast ... because they don't talk to the right people and cannot predict the future.
full name - 2009-26-2 07:26:00 PST -
So in the gathering gloom and to avoid their impending layoff, R&D engineers are, to a person, rushing around madly to find "new, bright and shiny" hobby-horses to push into production, rather than half-heartedly engaging in the usual mediocre practice of patching up the same old tired products to satisfy the CEO's customer-service dicta.
Semis - don't fret, your salvation is at hand.
Raji Mohammed - 2009-26-2 05:56:00 PST -
Poorly, poorly done. this article quotes analysts forecasts like they are factual. these forecasts are fiction.
Analysts have multiple problems
1) this is all forecast, prediction, crystal ball stuff based on partial information and rumor
2) analysts rely on bean counting without intelligence
3) analysts touch significantly less than the entire market
4) analysts cannot even agree with themselves, I''ve read reports from the analysts listed above that directly contradict what''s in this article.
analysts typically interact only with the market leaders
full name - 2009-25-2 12:31:00 PST
