Financial Crisis will Remove more than $25B from Semiconductor Market in 2009

(Business News & Technology News, 6 Nov 2008)

The economic crisis is having a significant impact on the semiconductor industry, as worldwide semiconductor revenue growth in 2009 is expected to be 1 percent, down by approximately 7 percentage points from previous estimates, according to preliminary estimates from Gartner Inc.

In the third quarter of 2008, worldwide semiconductor revenue for 2009 was forecast to be $307.7 billion, a 7.8 percent increase from 2008 revenue. Gartner analysts now expect worldwide semiconductor revenue in 2009 to total approximately $282 billion, a 1 percent increase from 2008 revenue.

Although semiconductor companies mostly met expectations for the third quarter of 2008 (the semiconductor industry grew by approximately 5 percent quarter over quarter), guidance for the fourth quarter of 2008 continues to drop. Gartner estimates worldwide semiconductor revenue in 2008 to total $279.4 billion, a 2 percent increase from 2007.

"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," says 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."

Gartner has gained an understanding of the potential impact on semiconductor growth in 2009 by checking the sensitivity of changing demand in key application markets. Gartner applied top-level assumptions to reductions in system units and reductions in semiconductor content in systems. PCs and cell phones account for approximately a third of the total semiconductor market, so they are the biggest applications for adjusting growth. For example, if the system unit percentage change of PCs is lowered by 8 percent, this would impact semiconductor growth by 1.61 percent.

"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 says.

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