Semiconductor Market Declines Less Than Expected

Although the global semiconductor industry has little to cheer about in 2009, with revenue dropping by 12.4 percent and only one of the top 10 suppliers achieving growth for the year, there is one source of solace for the battered chip makers: it could have been much worse.

"The year 2009 will be remembered as one of the most dismal years in the history of the global semiconductor business, with a plunge of more than $32 billion in revenue compared to 2008," said Dale Ford, Senior Vice President at iSuppli Corp. "However, iSuppli's preliminary estimate of a 12.4 percent decline is far better than expectations from early 2009 of a more than 20 percent plunge.

"There was little room for anything but pessimism after the industry suffered a sequential revenue decline of 21.4 percent in the fourth quarter of 2008 and an 18 percent drop in the first quarter of 2009. However, semiconductor sales rebounded smartly after that, with sequential increases of more than 18 percent in the second and third quarters and an expected 5 percent rise in the fourth quarter. This strong rebound means 2009 will be much less painful than had been feared earlier in the year."

The better-than-expected results in 2009 are attributable to a surprisingly strong performance in the memory market as well as in sales of chips for consumer electronics and wireless products.

Regional and application trends
The impact of the downturn is significantly different among the various regional and application markets.

The wireless communications market for semiconductors is the most resilient segment in 2009 with an expected decline of only 8.2 percent. Next best will be the data processing segment, with a projected decline of 9.8 percent.

The hardest-hit area, by far, was the automotive electronics industry, with a drop of 26.1 percent, followed by industrial electronics and consumer electronics at negative 15.2 and 15.1 percent respectively.

The Asia Pacific region is set to post the strongest performance both as a supplier as well as a consumer of semiconductors. Semiconductor companies with headquarters in Asia actually are expected to see their combined revenue grow by 0.3 percent. Total shipments of semiconductors to the Asia Pacific region are forecasted to decline by only 6.8 percent.

On the other hand, Europe was the hardest hit region in 2009. Shipments of semiconductors to Europe are estimated to fall by 20.8 percent and companies headquartered in the European region are expected to suffer a combined drop of 24.2 percent.

Other 2009 semiconductor developments include:

-- The memory market will fare the best of all major semiconductor segments in 2009 with only a 6.7 percent decline. In fact, NAND flash memory is expected to actually achieve double-digit growth with a projected 16.4 percent rise in revenue.
-- LEDs and NAND memory are the only semiconductor products expected to grow in 2009.
-- Logic integrated circuit and microcomponent revenue is forecasted to decline by 11 percent and 12.5 percent, respectively.
-- The hardest-hit market in 2009 will be analog integrated circuits with an expected drop of 18.7 percent. Next hardest hit will be sensors and actuators with a 16.3 percent decline and discrete semiconductor components with a 15.9 percent decline.

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