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The global credit crunch and looming economic recession has pulled the semiconductor down to the point that Malcolm Penn of Future Horizons thinks the industry has now entered its eleventh recession. Penn expects the industry to still post a 2.2 percent growth figure for 2008, which is inline with the SIA’s latest projection, but 2009 growth will decline a further 2 percent.

“We now expect Q4-08 to be down 6 percent on Q3-08, making 2008’s growth just 2.2 percent on 2007 - the fourth consecutive year of single digit market value growth,” said Penn. “Staring a global economic recession in the face, a chip market contraction in 2009 is unavoidable; the only big question is ‘how bad will it be’? The concern on everyone’s mind is if 2009 will be a re-run of 2001?”

“Any recession is bad, but some are worse than others, and right now 2009 won’t be a 2001 replay,” Penn explains. “The 2001 slowdown was triggered by a simultaneous collapse of the dot-com inflated demand euphoria, the 9-11 driven economic slowdown and a massive inventory burn just as a huge amount of excess capacity was coming on stream.”

Malcolm Penn, CEO and Chairman of industry analyst house Future Horizons, in the November report.

“We now expect Q4-08 to be down 6 percent on Q3-08, making 2008’s growth just 2.2 percent on 2007 - the fourth consecutive year of single digit market value growth,” said Penn. “Staring a global economic recession in the face, a chip market contraction in 2009 is unavoidable; the only big question is ‘how bad will it be’? The concern on everyone’s mind is if 2009 will be a re-run of 2001?”

“Any recession is bad, but some are worse than others, and right now 2009 won’t be a 2001 replay,” Penn explains. “The 2001 slowdown was triggered by a simultaneous collapse of the dot-com inflated demand euphoria, the 9-11 driven economic slowdown and a massive inventory burn just as a huge amount of excess capacity was coming on stream.”

“Everything that could have gone wrong did go wrong, the so-called perfect storm,” said Penn. “This time around, aside from the economy, all the other underlying industry trends are good. Inventories are not seriously bloated, wafer fab capacity utilisation levels are high, capital expenditure is very low and decreasing and ASPs were in the midst of a long-term structural recovery phase. All of these factors will help cushion the economic slowdown,” he said.

However, Penn believes that the industry will suffer an 8.7 percent decline in the first-half of 2009, compared to the second-half of 2008. Although a recovery is projected after that it will not rebound enough to post overall growth for the year.

The bright spot is 2011-12 as he expects the market to recover strongly with double-digit growth years.