Fear, negative momentum influence chip market, iSuppli says
The psychology of many industry players has shifted to a "survival mentality," with cost-control and cash-conservation considerations driving decisions, iSuppli says as it reports full-year revenue will decline in 2008 for the first time since 2001.
By Suzanne Deffree, Managing Editor, News -- EDN, November 19, 2008
Worldwide semiconductor revenue will decline in 2008 compared to 2007, according to the latest estimates from iSuppli Corp.
The research company reported this morning that global semiconductor revenue now is expected to decrease to $266.6 billion for full-year 2008, down 2% from $272 billion in 2007. ISuppli's previous forecast made in September called for 3.5% growth. The market research company noted that the expected 2008 decline will represent the first year of decline for the global semiconductor industry since the post dot-com bust year of 2001, when revenue plunged by 28.7%.
“The first evidence that the semiconductor industry was entering a recession arrived in the third quarter, before the financial crisis began sweeping the world in October,” said Dale Ford, senior VP of iSuppli's market intelligence services, in a statement today. “ISuppli previously had predicted that the third quarter would generate 7.9% growth in semiconductor revenue compared to the second quarter. However, actual growth in the third quarter came in at a very anemic 2.5% quarter-to-quarter rise. Year-over-year revenue in the third quarter was down by 2.9%.”
ISuppli revised its forecast on Q3 results from 121 leading semiconductor suppliers and on Q4 revenue estimates made by the major chipmakers.
“Weak-to-strongly-negative growth was reported in the third quarter by the complete range of semiconductor suppliers, large and small, across all markets,” Ford said, noting that memory suppliers are suffering the most severe declines.
ISuppli estimated the negative momentum will continue into Q4 and that the overall market will decline by 10.9% in the quarter compared to the Q4 2007.
The company is hardly alone in lowering its full-year 2008 estimates. Gartner Inc has lowered its growth estimate for the year to down 1% to up 2%, and has estimated 2009 worldwide semiconductor revenue growth will most likely fall by 2.2%. The World Semiconductor Trade Statistics group this week also revised estimates, projecting 2.5% growth this year and a 2.2% decline in 2009. And the Semiconductor Industry Association this morning reported that it expects 2008 to show growth of 2.2%, followed by a 5.6% decline in 2009.
The revisions come as several industry players have reduced their Q4 outlooks. MPU bellwether Intel Corp, for one, recently lowered its sales guidance for the December quarter. The chipmaker now estimates its Q4 revenues could fall as much as 15% on Q3's $10.2 billion.
“In discussions with semiconductor suppliers, equipment OEMs, and contract manufacturers, a story of fear and great uncertainty has emerged,” iSuppli's Ford said. “As dramatic declines in consumer and industrial confidence began developing in late summer, order cancellations began to grow and in many cases, slowing orders degenerated into a complete stop in orders as players across the supply chain moved to extremely cautious positions in the face of increasingly negative economic news.”
The psychology of many industry players now has shifted to a "survival mentality," iSuppli said, with cost-control and cash-conservation considerations driving decisions.
According to iSuppli, "it is now clear that the semiconductor industry is already in decline and the remaining questions are how deep and how long this decline will extend in 2009 and possibly 2010."
