Gartner: Chip industry faces further decline in 2009

The semiconductor industry is expected to see a consecutive fall in annual revenues for the first time in its history, with a 16.3 percent decline next year

The already hard-pressed semiconductor market will see a consecutive decline in annual revenues for the first time in its history, according to Gartner.

Worldwide semiconductor revenue for 2009 is forecast to total $219.2bn (£142.7bn) — a 16.3 percent decline from 2008 revenue — according to Gartner. The decline between 2007 and 2008 was 4.4 percent.

"This market was originally forecast to do a modest loss and then revenues fell off a cliff," said Andrew Norwood, a research vice president at Gartner, in a statement on Monday. "Next year, we get the full brunt of the downturn."

In the analyst house's latest official forecast, issued in mid-November, Gartner predicted that 2008 worldwide semiconductor revenue would show 0.2 percent growth, before declining by 2.2 percent in 2009.

As a result of the financial crisis, semiconductor sales in the fourth quarter of 2008 saw a record quarter-on-quarter decline of 24.4 percent, surpassing the 20 percent quarterly-decline record set in the second quarter of 2001, Gartner said in a statement.

Gartner believes this downwards trend will continue before the market picks up again in 2010 and 2011, Norwood told ZDNet UK.

"That is when we expect the industry to start to get back on its feet again," he said.

In the meantime, the effect of the downturn on the semiconductor market "will be much broader and much wider than we would normally expect, and it will effect all areas of the semiconductor business, and not just PCs and workstations", he added.

Norwood also singled out the DRAM market as a "wild card", as it has been particularly hard hit and "could prolong the current downturn", he said.

"The DRAM market is so bad that suppliers must either significantly scale back supply, or the weaker players will be forced into mergers or bankruptcy," Norwood said. "Either way, we are expecting DRAM pricing to firm during the second half of 2009, and this has the potential to moderate the decline in 2009 semiconductor revenue."