Financial Meltdown Trims Semiconductor Sales Forecast

Demand for electronic equipment by Wall Street firms, many of which have failed in the current crisis, is expected to drop dramatically by the end of the year, market researchers with iSuppli said.
ISuppli on Thursday lowered its 2008 forecast for worldwide semiconductor sales and warned that the market could get much worse if the current global financial crisis worsens.

The market researcher trimmed its forecast to $280.1 billion, or 3.5% higher than last year. ISuppli had previously predicted a 4% increase.

Last month, the U.S. Semiconductor Industry Association reported global semiconductor sales rose 5.5% in August, compared with the same period a year ago, an indication that chip sales were in line with iSuppli expectations. In September, however, the world credit crisis and economic downturn appeared to be taking their toll on the industry.

Dale Ford, senior VP for market intelligence at iSuppli, said demand for electronic equipment by Wall Street firms, many of which have failed in the current crisis, is expected to drop, which would decrease demand for semiconductors.

In addition, companies outside of Wall Street may be unable to get the necessary credit to buy electronic gear. "With companies unable to get credit, the crisis could spread to the wider economy," Ford said in a statement.

Finally, depending on the severity of the economic downturn, consumer confidence could plummet, which would have a major impact on spending. If people cut back, that would like have an impact on PC and consumer electronics sales.

ISuppli remained "cautiously optimistic" regarding PC sales, but said there were signs of a weakening in demand, based on sales of DRAM, the memory chips used in PCs. The DRAM market started to see softer demand from its key PC market in September.

Nevertheless, iSuppli said it would stick to its prediction for now of 12.5% growth in PC unit shipments for this year.

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