Press Release

STAMFORD, Conn., February 25, 2009 View All Press Releases

Gartner Says Worldwide Semiconductor Revenue On Pace to Decline 24 Percent in 2009

Analysts Say the Industry Will Fail to Return to 2008 Revenue Totals Through 2013

The impact of the financial crisis will result in the semiconductor industry experiencing near record revenue declines in 2009, according to Gartner, Inc. Worldwide semiconductor revenue is forecast to reach $194.5 billion in 2009, a 24.1 percent decline from 2008 revenue.

Market conditions have worsened since Gartner’s previous semiconductor outlook in mid-December of 2008. At that time, Gartner had forecast 2009 revenue to decline 16 percent.

The industry is expected to return to positive growth in 2010, growing 7.5 percent, followed by additional growth through 2012. Even with three years of increased revenue, the semiconductor industry will fail to return to 2008 revenue totals. In 2012, the worldwide semiconductor revenue is projected to reach $253.4 billion, still below 2008 revenue of $256.4 billion.

“We believe that the financial crisis has reset the semiconductor market,” 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.

“The rebound after this recession will be similar to that in 2001 because there will be three years of modest growth after the worst year. However, we see a difference in year four, where we expect another overcapacity situation for the industry, especially in DRAM, because of significant manufacturing investments made in the second and third years of the recovery,” Mr. Lewis said.

Memory, specifically DRAM, is still a wild card in the semiconductor forecasts for 2009. DRAM suppliers lost more than $13 billion in 2007 and 2008. Some DRAM companies are starting to go bankrupt and other leading suppliers are substantially reducing supply. This reduced supply should lead to significant price increases in the second half of 2009.

Worldwide semiconductor revenue is expected to fall by at least 17 percent sequentially in the first quarter of 2009. There is a strong possibility that the first quarter of 2009 could be worse, and if the market continues with moderate declines in the second and third quarters of 2009, the industry could face a record annual decline. Gartner analysts warned that Gartner’s negative scenario could reach a 33 percent decline in 2009.

“Semiconductor suppliers should prepare for Gartner’s negative scenario of a 33 percent decline in 2009 revenue,” Mr. Lewis said. “Tight control of expenses is essential, but suppliers should reconsider dropping their overall research and development (R&D) budgets because focused R&D investments in the recession will help determine the winners in the upturn. Outsourcing and partnerships can help companies get the most from their R&D budgets.”

Gartner has removed solar revenue from its semiconductor forecast because solar cells are not traditional semiconductor devices (solar cells focus on energy generation and are not components in an electronic system), and their high growth rates were distorting the true growth of the semiconductor industry. Gartner is expanding its coverage in solar and will provide detailed technology forecast breakouts in a separate report.

Additional information is available the Gartner report “Dataquest Alert: Forecast, Semiconductor Revenue, Worldwide, 2009-2013." The report is available on Gartner’s Web site at http://www.gartner.com/DisplayDocument?ref=g_search&id=896012&subref=simplesearch.

Contacts
About Gartner

Gartner, Inc. (NYSE: IT), is the world's leading research and advisory company and a member of the S&P 500. We equip business leaders with indispensable insights, advice and tools to achieve their mission-critical priorities and build the successful organizations of tomorrow.

Our unmatched combination of expert-led, practitioner-sourced and data-driven research steers clients toward the right decisions on the issues that matter most. We're trusted as an objective resource and critical partner by more than 12,000 organizations in more than 100 countries—across all major functions, in every industry and enterprise size.

To learn more about how we help decision makers fuel the future of business, visit www.gartner.com.

Comments or opinions expressed on this blog are those of the individual contributors only, and do not necessarily represent the views of Gartner, Inc. or its management. Readers may copy and redistribute blog postings on other blogs, or otherwise for private, non-commercial or journalistic purposes. This content may not be used for any other purposes in any other formats or media. The content on this blog is provided on an "as-is" basis. Gartner shall not be liable for any damages whatsoever arising out of the content or use of this blog.