Q4 plunge sends semiconductor market into 2008 decline

The severity of the decline in sales in the fourth quarter will mean the semiconductor market will shrink in 2008 compared to 2007 according to Gartner.

For only the fifth time in the last 25 years, the semiconductor industry will post a decline in revenue, with worldwide semiconductor revenue totalling $261.9bn in 2008, a 4.4 per cent decline from 2007, according to preliminary results by Gartner.
 
“In the last quarter of 2008, market conditions deteriorated significantly, and as the fourth quarter has progressed, many vendors have issued updated guidance for the quarter, reflecting weakening market conditions,” said Andrew Norwood, research vice president at Gartner. “Unfortunately for vendors, 2009 is going to be considerably worse. Some have compared the precipitous decline in semiconductor demand to that of the 2001 ‘dot-com’ bubble. However, unlike 2001, this economic downturn is much more broad-based and not limited primarily to the technology sector.”
 
“Given this increased uncertainty, all semiconductor companies should be focused on cash preservation and inventory management,” Mr Norwood said. “While gross margin for integrated device manufacturers will show significant declines owing to under-utilised factories, focusing on inventory now should help the recovery when demand returns. This is also an excellent opportunity for the larger companies with stronger balance sheets to make strategic acquisitions.”
 
Intel increased its market share to 13.1 per cent in 2008. However, Gartner’s 2007 revenue includes Intel’s NOR flash memory business that was spun off in the second quarter. Comparing only continuing operations, Intel’s revenue grew 6.5 per cent, beating the market average by nearly 11 per cent.

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