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Gartner: Semiconductor revenue to decline 22%

Analysts are predicting that worldwide semiconductor revenue will decline 22.4% compared to 2008

Research firm, Gartner, has released projections which forecast the worldwide semiconductor revenue to reach US $198 billion in 2009. The figure represents a 22.4% decline from 2008 revenue, though the figure is better than the estimated 24.1% decline that the Stamford-based firm predicted for the first fiscal quarter of the year.

"First quarter PC shipments came in better than expected, which led to an improved outlook for microprocessors, but we believe most of this improvement was due to the fact that inventories had been run down too far, rather than true demand returning," said Bryan Lewis, research vice president at Gartner.

"We are expecting 4.9 percent growth in second quarter semiconductor sales based on recent semiconductor company guidance, and this positive movement has caused us to move away from our 1Q09 worst-case scenario of a record down year in 2009. While this is positive news, the semiconductor industry is clearly not out of the woods, as there is minimal evidence that demand is returning, except in China," Mr. Lewis said.

Gartner attributed inventory burn in the PC market in the last two quarters for pushing component demand significantly below PC demand, causing prices to dive across the board.

"Consumer spending will remain somewhat depressed due to high unemployment, low housing pricing, and relatively low consumer confidence," Mr. Lewis said. "IT budgets are modestly down in 2009, but companies are not spending at the rate of their budgets."

PC vendors that started cutting inventory early were able to achieve significant savings on material costs, according to Gartner, with component prices expected to stabilise by the middle of this year.

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