Semiconductor revenue in massive slowdown, Gartner says

Semiconductor revenue may return to 2008 revenue levels by 2013, Gartner said in a survey released on Wednesday. The recession is a massive setback on semiconductor companies, which mirrors a revenue decline witnessed in 2001 when the Internet bubble burst, said Bryan Lewis, research vice president at Gartner.

“After the 2001 recession, in which semiconductor sales plummeted by a record 32.5 percent, semiconductor sales took about four years to get back to 2000 levels,” Lewis said.

Over the next year worldwide semiconductor revenue is expected to reach US$194.5 billion, a 24.1 percent decline from 2008 revenue. Gartner had earlier predicted a fall of 16 percent in yearly semiconductor revenue.

Restrained consumer and business spending on products like PCs and cell phones is having an even more adverse effect on semiconductor revenue than expected, said Jon Erensen, principal research analyst for Gartner. Those products use semiconductors and represent about one-third of the industry's revenue.

The semiconductor revenue will hit rock bottom by the middle of 2009 and slow recovery may start in 2010 when demand for products starts increasing, Erensen said. The recovery will have a roll-over effect, with chip makers investing to build capacity in fabrication plants in anticipation of meeting the increased semiconductor demand.

But for now chip production has been cut back, with fabs recording lower utilization rates as demand for semiconductors is much weaker, Erensen said. This reduced supply could lead to significant price increases for memory products in the second half of 2009.

DRAM (dynamic RAM) is an especially price-sensitive space and could see a price rise later this year as semiconductor manufacturers cut down supply, Erensen said. Prices may start coming down when demand increases for PCs and cell phones around 2010 and manufacturers build out capacity to meet the demand.