Worldwide semiconductor revenue to decline 24% in 2009

The impact of the global financial crisis will lead to near record revenue declines for the semiconductor industry in 2009, according to research by Gartner.

Worldwide semiconductor revenue is forecast to reach $194.5 billion in 2009, a 24.1 percent decline from 2008 revenue. In mid-December of 2008, Gartner forecast 2009 revenue to decline 16 percent.

Market conditions have worsened considerably since then.

On the other hand, the semiconductor industry is expected to return to positive growth in 2010, growing 7.5 percent, followed by additional growth through 2012. However, even with three years of increased revenue projected to reach $253.4 billion, the industry will fail to return to 2008 revenue totals of $256.4 billion.

“We believe that the financial crisis has reset the semiconductor market,” said Bryan Lewis, research vice president at Gartner. “After the 2001 recession, in which semiconductor sales plummeted by a record 32.5 percent, semiconductor sales took about four years to get back to 2000 levels. The rebound after this recession will be similar to that in 2001."

Lewis added that Gartner expects another overcapacity situation for the industry, especially in DRAM, because of significant manufacturing investments made in the second and third years of the recovery.

DRAM suppliers lost more than $13 billion in 2007 and 2008, and some DRAM companies are beginning to go bankrupt. Reduced supply should lead to significant price increases in the second half of 2009, Gartner forecasts.

Worldwide semiconductor revenue is expected to fall by at least 17 percent sequentially in the first quarter of 2009, and there is a strong possibility that the first quarter of 2009 could be worse. If the market continues with declines in the second and third quarters of 2009, the industry could face a record annual decline of 33 percent in 2009.