2009 bad for chips 'but could have been a lot worse'

Chip sales dropped 12.4 per cent in 2009, according to a preliminary estimate by iSuppli, with just one of the top-ten suppliers seeing growth for the year, but the analyst firm said it could have been 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 $32bn in revenue compared to 2008,” said Dale Ford, senior vice president at iSuppli “However, iSuppli’s preliminary estimate of a 12.4 per cent decline is far better than expectations from early 2009 of a more than 20 per cent plunge.

“There was little room for anything but pessimism after the industry suffered a sequential revenue decline of 21.4 per cent in the fourth quarter of 2008 and an 18 per cent drop in the first quarter of 2009. However, semiconductor sales rebounded smartly after that, with sequential increases of more than 18 per cent in the second and third quarters and an expected 5 per cent 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 down to a surprisingly strong performance in the memory market as well as in sales of chips for consumer electronics and wireless products. Semiconductor suppliers have been broadly impacted by the downturn, with only 27 of the 135 leading semiconductor suppliers tracked by iSuppli expected to achieve revenue growth for the year.

The one company to see growth in semiconductor revenue in 2009 is Samsung Electronics. Although the company is set to expand its revenue by only a scant 1.3 per cent, this represents a standout performance during such a poor year, iSuppli said.

“Samsung is benefitting from its dominance in the memory market, whose performance was dramatically better than the semiconductor industry as a whole,” Ford said. “The company is the number-one supplier of both DRAM and NAND flash, the two largest segments of the memory market. Samsung managed to outperform the memory market partly due to its early leadership in new, higher-margin memory products, such as DDR3 SDRAM.”

The company maintained its number-two position in the global semiconductor market behind microprocessor giant Intel of the United States. Qualcomm is projected to post the next-best performance among the top-ten suppliers, with its revenue expected to remain flat compared to 2008. The US-based fabless semiconductor company managed to keep revenue steady due to its participation in the wireless segment and its rising share of the market for baseband chips for cell phones. This will allow Qualcomm to advance two places in the global semiconductor industry, rising to sixth place in 2009, up from eighth in 2008.

Advanced Micro Devices (AMD) of the United States managed to limit its 2009 revenue decline to 7.6 per cent due to its strong performance in the microprocessor market which is also expected to decline by only 7.6 per cent in 2009. This allowed AMD to climb back into the top-ten rankings after a one-year absence, rising to the number-nine position, up from twelfth place in 2008.

Sony of Japan suffered the worst performance among the top-ten suppliers, with its revenue set to decline by a stunning 32.8 per cent for the year, so it will drop from seventh in 2008 to tenth.

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