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Global Chip Revenue Forecast Drops To Near Record Low

Gartner predicted it will take at least three years for the semiconductor industry to regain 2008's revenue levels.

Gartner on Wednesday dropped its 2009 revenue forecast for the semiconductor industry to a near record low, saying market conditions have worsened as a result of the global financial crisis.

The industry will see near record revenue declines this year before returning to growth in 2010, the analyst firm said. "We believe that the financial crisis has reset the semiconductor market,” Gartner analyst Bryan Lewis said in a statement.

Worldwide revenue from semiconductors, which include the microprocessors that drive business and consumer PCs, is expected to fall 24.1% from 2008 to $194.5 billion, Gartner said. The firm in mid-December predicted a 16% drop.

In 2010, revenue will grow 7.5% from this year, followed by additional increases through 2012, Gartner predicted. However, even with three years of growth, the industry is not expected to return to its 2008 total. In 2012, revenue is projected to reach $253.4 billion, compared with $256.4 billion last year, which saw the start of the current financial crisis that has tightened the availability of credit.

As a point of comparison, Gartner said it took four years after the 2001 recession, in which semiconductor sales plummeted by a record 32.5%, for revenue to get back to 2000 levels.

The "wild cards" in Gartner's 2009 forecast are chips that provide system memory in PCs. DRAM suppliers lost more than $13 billion in 2007 and 2008, and some companies are starting to go bankrupt. Other vendors are substantially reducing supplies. Both factors will lead to a reduction in supplies that could result in significant price increases in the second half of this year, Gartner said.

Nevertheless, Gartner warned that revenue could fall even further than its latest forecast. The first quarter of this year is expected to see a 17% drop from the fourth quarter of last year, but that decline could be worse. If the market continues with moderate drops in the second and third quarters, than the industry could face a record annual decline for 2009 of 33%.

"Semiconductor suppliers should prepare for Gartner’s negative scenario of a 33% decline in 2009 revenue," Lewis said.

Gartner's full report on the semiconductor industry is available on its Web site.

InformationWeek has published an in-depth report detailing the views of more than two dozen industry leaders on what should be top of mind for President Obama's CTO. Download the report here (registration required).

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