Global semicon could decline by over 5pc in 2009!

The year 2008 will soon be relegated to history, albeit with the dubious distinction of handing out an extremely unforgettable year for the memory chip makers!

This trend was starkly evident, as a major downturn in this segment caused revenue to fall for nearly all suppliers and contributed to negative results for the overall semiconductor industry, according to recently released preliminary market-share figures from iSuppli Corp. (The memory market is being dealt with in the next blog!)

The key question remains as to whether the semicon industry has really lost the money-making ability? According to Dale Ford, senior vice president, market intelligence services, for iSuppli, the semiconductor industry goes through cycles of revenue growth and profitability. He says, "It would not be correct to extrapolate the current challenges of the semiconductor industry and say that the industry has “lost its money-making ability.”

iSuppli expects that the the industry will experience some level of restructuring during this downturn that will help it emerge to renewed revenue growth and profitability.

Revenue to drop 2 percent
Given the current scenario, it is taken for granted now that the global semicon revenue will likely decline in 2008. Ford says: "iSuppli predicts that the semiconductor industry will decline by 2 percent in 2008. However, it is possible for the decline to worsen as more companies revise down their fourth quarter guidance."

The primary reasons for the decline are the over supply of memory ICs and resulting steep price declines and the global financial/economic crisis that has impacted consumer spending and the production of electronic equipment.

Fabless flies high
Coming down to the top 20 semiconductor suppliers (see table above), it would be interesting to see how the fabless companies have fared overall.

Ford says that Qualcomm, Broadcom and nVidia are predicted to be the only fabless companies in the top 20 semiconductor suppliers in 2008.

"Qualcomm and Broadcom are expected to see their revenues grow by 19.6 percent and 26.4 percent, respectively. Only nVidia is expected to see a decline in revenues with a projected contraction of 0.5 percent," he adds.

There are some non-memory players in the top 20, who have registered declines. While it is not possible to comment on every single company, Ford mentions that the declining revenues are due to a variety of factors, including divestiture of business units, declining markets, and lost market share.

Fab spend and outlook 2009
Critically, there is a need to also see how the fab spends are looking like in 2009.

According to SEMI's recent World Fab Forecast, spending on fab construction projects in 2008 is likely to decline by 41 percent year-over-year (YoY), as projects are pushed out or put on hold. In 2009, the Americas and Japan are expected to be the only regions with positive growth rates for construction spending.

Ford adds, "Currently, we see fab spending declining significantly in 2009."

Overall, what's the outlook going to be like for the global semiconductor industry in 2009! Ford concludes: "We have not released a formal forecast to the press at this time. However, I will say that we expect the semiconductor market to decline by more than 5 percent in 2009."