Gartner: Chip sales better than expected in 2009

The semiconductor industry is well positioned to come out of its two-year slump, despite the fragility of the recovery, according to Gartner
Written by Matthew Broersma, Contributor

Sales of chips in 2009 fell for the second year in a row, but a comeback in the second half promises strong growth in 2010, according to Gartner.

Worldwide semiconductor industry revenues last year dropped by $26.8bn (£17.7bn) to $228.4bn, a decline of 10.5 percent on 2008 levels, according to figures released on Monday by the research firm.

In December, Gartner predicted a $29bn fall in overall industry revenues. An improvement in consumer spending on products such as PCs, mobile phones and automobiles, helped improve the picture, according to the company.

"In a nutshell, the economy turned around faster than expected," Gartner principal analyst Peter Middleton told ZDNet UK. "The electronics industry corrected its inventory problems faster than expected, and got the supply chain into a healthy state. That forms a good basis going into 2010."

However, as the recovery progresses and manufacturers bring inventory back into the supply chain, they may overshoot demand, Middleton said.

"What we are watching for now is any sign of an overshoot," he said. "The industry is coming back at quite a strong rate, but the recovery is still somewhat fragile."

The economic recovery in emerging markets has played an important role in the rise in semiconductor revenues, he noted. An increase in memory prices, spurred by growing demand for memory, has also had an effect, he added.

Middleton predicted that an increase in corporate spending will help boost global revenues this year. "Through 2010 we are going to see a combination of consumer spending and enterprise spending," he said.

Intel retained its lead position in the semiconductor market in 2009 for the 18th consecutive year, according to Gartner. Its share grew to 14.6 percent, from 13.6 percent in 2008, despite a revenue decline of $1.6bn. Intel's performance was largely due to rising demand for PCs — laptops, in particular — which sold well despite the recession, the research firm said.

Memory makers Samsung and Hynix were two of the few companies to see revenues increase, according to the report. Samsung, the second-largest chip maker, saw its revenues rise from $17.4bn in 2008 to $17.7bn in 2009, and its market share rise by 1.7 percent to 7.7 percent. Samsung had seen strong declines in 2008, Gartner noted.

Hynix, the seventh-largest chipmaker, was able to gain market share in the DRAM market and increase its revenues despite overall declines in DRAM sales. Hynix's market share rose by 0.4 percent to 2.6 percent.

Infineon saw the largest decline in 2009, with its overall revenue down 43.1 percent due to the bankruptcy of its Qimonda memory unit and the selloff of the Wireline Communications unit.

In November, Gartner said it expects this year's worldwide semiconductor revenue to be restored to 2008 levels, thanks to strengthening PC sales.

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