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Semiconductor revenue to drop next year: Gartner

AGENCIES , WASHINGTON

Worldwide semiconductor revenue is forecast to drop next year, the first ever back-to-back years of declining sales, market research firm Gartner said on Tuesday.

Gartner said worldwide semiconductor revenue is forecast to total US$219.2 billion next year, a 16.3 percent decline from this year’s revenue.

Gartner has forecast revenue for the industry of US$261.9 billion this year, preliminary figures showed, a 4.4 percent decline from last year.

In a forecast issued in the middle of last month, Gartner said worldwide semiconductor revenue was expected to grow 0.2 percent this year and for the market to decline 2.2 percent next year.

But the Stamford, Connecticut-based technology market research firm said the financial crisis “is having an unprecedented negative impact on fourth quarter 2008 sales and profits.”

Gartner said it expects semiconductor sales in the fourth quarter of this year to show a record quarter-on-quarter decline of 24.4 percent, surpassing the 20 percent decline record set in the second quarter of 2001.

“While many executives may try to compare this downturn to the 2001 tech bubble, this downturn is different in many ways,” said Bryan Lewis, research vice president at Gartner.

“This downturn is broad-based, not limited to only technology, has a much different growth profile before the downturn, and has far less inventory buildup,” he said. “Inventory levels this time have been monitored and more tightly controlled throughout the entire food chain and this will help the market come back more quickly than in 2001.”

Semiconductor sales declined a record 32.5 percent in 2001 from the previous year.

Gartner said the “wild card” for the semiconductor industry next year is sales of dynamic random access memory (DRAM) chips, a key component in computers and other electronics, which have been slumping for 18 months.

“The DRAM market is so bad that suppliers must either significantly scale back supply, or the weaker players will be forced into mergers or bankruptcy,” said Andrew Norwood, research vice president at Gartner.

“Either way, we are expecting DRAM pricing to firm during the second half of 2009, and this has the potential to moderate the decline in 2009 semiconductor revenue.

“Only widespread government support for the ailing DRAM vendors could avert this supply rationalization, and that would be a disaster for the industry as it would just prolong the current downturn,” he said.

“In the negative scenario, the semiconductor industry could decline 24.7 percent [next year],” Gartner said.

Meanwhile, global stockpiles of semiconductors will almost triple this quarter after demand declined faster than expected because of the worldwide recession, researcher iSuppli Corp said.

Excess supplies may rise to US$10.2 billion from US$3.8 billion in the previous quarter, El Segundo, California-based iSuppli said in a statement on Tuesday. The situation prompted the researcher to issue a “red alert” on chip inventory levels for the first time, the statement said.

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