Q1 semi sales decline seasonal, Q2 quarter to watch, Gartner says

Gartner expects a 7% sequential decline for Q1 semiconductor sales, once all data is in, and says that growth prospects for 2008 will largely be determined by the strength or weakness of Q2 sales.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 4/7/2008

The fate of 2008’s semiconductor market was not sealed in Q1, according to research from Gartner Inc today.

Noting recently released World Semiconductor Trade Statistics (WSTS) figures for February that put total semiconductor sales at $18.7 billion -- down 2% from $19.2 billion in January but up 4% from $18 billion in February 2007 -- the market research company determined that Q1 sales are heading for 7% sequential decline. The $18.7 billion in sales was about $1 billion lower than Gartner’s expectations.

On the figures, the company said it now expect Q1 semiconductor sales to total approximately $62 billion, compared with WSTS reported sales of approximately $67 billion in Q4 2007.

To be fair, Gartner reminded that Q1 2007 sales declined about 6% quarter over quarter. “So, unless sales were much weaker than expected in March, the seasonal decline in sales in early 2008 is likely to be within the normal range and should not be a cause for major alarm (despite worries about the weakening US economy and its potential impact on global macroeconomic conditions),” Gartner analyst Richard Gordon (pictured) said in the company’s Semiconductor DQ Monday Report.

The weekly report echoes similar statements made by IC Insights late last month that encouraged the industry to hold out for full Q1 results before re-evaluating forecasts. IC Insights has warned that depending on the economy’s state, final Q1 IC market numbers could report as much as a 9% sequential decline.

The impact of the troubled economy cannot be ignored, however. iSuppli this morning reported that it slashed its 2008 NAND growth forecast by two-thirds in large part because softening consumer spending has encouraged NAND buyers like Apple to cut back purchasing.

The Gartner report continued to state that growth prospects for 2008 will largely be determined by the relative strength or weakness of Q2 sales.

“If quarterly sales decline in the second quarter, even if we see some strength in the market in the second half of the year, annual sales in 2008 will still struggle to exceed the level of 2007,” Gordon said. “We believe that flat-or-better Q2 sales will confirm that the global semiconductor industry has managed to avoid a sharp slowdown and place the market on a growth track through the second half of 2008 and into 2009.”

In a March Semiconductor DQ Monday report, Gordon wrote that Gartner had reduced its forecast for total semiconductor market growth in 2008 to 3.4%, compared with 6.2% in Q4, on a more-cautious demand-side outlook

Gartner’s next forecast update is scheduled for May.