Analysts predict global drop in 2008 chip sales

Fourth-quarter revenue expected to plummet 11 percent as economy batters semiconductor market

Two industry watchers this week revised their estimates of worldwide semiconductor revenue this year, with one even predicting a year-over-year decline.

ISuppli Wednesday said it is projecting that 2008 semiconductor sales will decline by 2 percent to US$266.6 billion this year from about US$272 billion in 2007. Just last month, iSuppli had predicted that 2008 semiconductor sales would grow by 3.5 percent over last year.

And Tuesday, the World Semiconductor Trade Statistics issued a report predicting that the global semiconductor market will grow by 2.5 percent and hit US$261.9 billion in 2008. That's down from the 3.2 percent growth the trade association reported last year.

"The first evidence that the semiconductor industry was entering a recession arrived in the third quarter, before the financial crisis began sweeping the world in October," said Dale Ford, a senior vice president for iSuppli. "[We] previously had predicted that the third quarter would generate 7.9 percent growth in semiconductor revenue compared to the second quarter. However, actual growth in the third quarter came in at a very anemic 2.5 percent quarter-to-quarter rise. Year-over-year revenue in the third quarter was down by 2.9 percent."

Ford noted in his report that memory suppliers are taking the biggest hit.

ISuppli is predicting that the negative momentum will continue into the fourth quarter with the overall market expected to drop by 10.9 percent compared to the same quarter last year.

Last month, analysts at iSuppli lowered their forecast for semiconductor growth from 2007 to 2008 from 4 percent to 3.5 percent. The earlier projection was made in August, but analysts said they were forced to downgrade it when the economy began forcing many companies to scale back IT spending plans.

And earlier this month, research firm IDC reported that the worldwide microprocessor market actually hit a new shipment record in the third quarter, largely boosted by Intel's new Atom processor. The chips, designed for the increasingly popular netbook computers, boosted the market despite the turbulent economic times, growing by 8.3 percent from the second quarter to the third.

The World Semiconductor Trade Statistics group sees the worldwide semiconductor market turning around in 2010.

"[We] foresee a continuously growing demand for electronic products, such as PCs, digital consumer appliances, mobile communications, and last but not least automotive electronics," said Ulrich Schaefer, the group's chairman, in a statement. "Although the present worldwide economic crisis will cause a reduction of sales in the next year, in the long run this positive trend will however continue."

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