Chip Forecast Reverses Course And Sees A Worse 2009


After weeks of more upbeat forecasts for semiconductor market, one research firm has reversed course and predicted a worse 2009 than previously anticipated.

ISuppli said it now sees semiconductor sales falling 23 percent this year with the weak automotive market a primary culprit for the deteriorating outlook. The firm in April had projected sales would tumble 21.5 percent.

“Conditions appear to be worse than previously expected,” says Senior Vice President Dale Ford. “The decline of worldwide automobile sales, particularly in North America, has had a major impact on overall electronic equipment shipments.”

In recent weeks, a number of research firms had raised their outlooks for the year citing greater business stability and a sharp draw down in semiconductor inventories. When inventories get too low, manufacturers replenish them by ordering more products.

So against that backdrop, the iSuppli reversal could be viewed as something of a warning – a canary in the silicon factory.

Yet, the research firm’s revision, release late Wednesday, did not paint a consistently dull canvas. Japanese chipmakers, which experienced a sharp reduction in first quarter production, have now reduced excess inventories and resumed production, it said.

This should contribute to global chip revenue rising 10.4 percent from the second to the third quarters and another 4.9 percent in the fourth quarter. Such an increase would be noticeable improvement from earlier this year.

Next year, chip sales should expand a healthy 13.1 percent, iSuppli added, suggesting a steady rebound will take hold. Let’s hope the firm is right this time.