The chips are down as credit crunch eats into semiconductors

4 Nov 2008

The ongoing credit crunch is set to wipe more than US$25bn off sales in the semiconductor industry.

Two respected tech industry analysts yesterday gave their outlook for the sector going forward. The two analysts reported a strong 2008, but agreed the future for the chip business is murky due to the impact of the credit crisis.

Gartner said the ongoing economic crisis is going to impact sales growth, with growth forecast to be down several percentage points to just 1pc in 2009.

Worldwide semiconductor revenue for 2009 was forecast to be US$307.7bn. However, Gartner now forecasts semiconductor revenue to be US$282bn, just a 1pc increase on 2008 revenue.

“Semiconductor growth was surprisingly strong until recently, given the very weak economic environment, but this will start to change in the fourth quarter of 2008,” said Bryan Lewis, research vice-president at Gartner.

“Mounting evidence suggests that the semiconductor industry will see negative growth starting in the fourth quarter of 2008, and that this will continue throughout most of 2009.”

Lewis said that PCs and cell phones account for one third of the total semiconductor market. If the system unit percentage change of PCs is lowered by 8pc, this would impact semiconductor growth by 1.6pc.

“In a recession, it’s important to remember that there will not only be a potential reduction in the number of systems sold, but also a move to lower-cost systems with less semiconductor content,” Lewis said.

IDC, which focuses on the PC processor segment of semiconductors, estimates that worldwide PC processor unit shipments grew 15.8pc year on year so far, with market revenue reaching US$8.3bn.

Intel’s new atom processor led to a boom in low-cost mobile PCs or netbooks.

“Not considering the effects of Atom, the overall market still grew at a decent pace in the third quarter,” said Shane Rau, director of Semiconductors: Personal Computing research at IDC.

“Intel’s and AMD’s shipments grew at a rate only slightly slower than typical for a third quarter, and seasonal demand appeared reasonable up until September. By segment, while the mobile processor segment grew aggressively, the server segment was soft.”

However, IDC said the worldwide demand environment looks weak, and both Intel and AMD indicated an uncertain outlook for 2009.

IDC said it is conservative about 2009, and will be lowering its upcoming unit forecast for the year.

By John Kennedy

Pictured: the future might not be all that bright for Intel’s smallest chip, the Intel Atom processor, if industry analysts’ predictions are anything to go by

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years