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Prepare for a 33% semiconductor industry decline, warns Gartner
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It has been a troubling first two months of 2009 and market research firm Gartner has now revised its semiconductor industry growth forecast, highlighting the global financial crisis as the key catalyst for another downgrade. According to Gartner, semiconductor sales will struggle to reach US$194.5 billion in 2009, a 24.1% decline from 2008. Gartner had said in December, 2008 that it expected sales to decline 16% in 2009. The month before, Gartner had forecasted sales of US$282 billion, a 1% increase from 2008.
“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%, semiconductor sales took about four years to get back to 2000 levels.
No surprise that Gartner expects a 17% fall in sales in the 1Q09 compared to the 4Q08. The macro economic conditions have deteriorated rapidly since Gartner’s mid-December 2008 forecast.
In hedging his bets for the full year, Gartner’s head of research noted that even with modest declines from the expected low point of the first quarter, the full year sales could drop 33% compared to 2008.
“Semiconductor suppliers should prepare for Gartner’s negative scenario of a 33% decline in 2009 revenue. Tight control of expenses is essential, but suppliers should reconsider dropping their overall research and development (R&D) budgets because focused R&D investments in the recession will help determine the winners in the upturn. Outsourcing and partnerships can help companies get the most from their R&D budgets.”
The extended u-shaped recovery Lewis painted is also not a finished picture.
“The rebound after this recession will be similar to that in 2001 because there will be three years of modest growth after the worst year. However, we see a difference in year four, where we expect another overcapacity situation for the industry, especially in DRAM, because of significant manufacturing investments made in the second and third years of the recovery.”
Lewis is therefore expecting the recovery in DRAM prices to be sufficient for manufacturers to have generated the cash or return of available debt structures from banks and financial institutions to enable renewed investments in capacity.
But does that contradict his assertion that the ‘financial crisis has reset the semiconductor market?'
