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Electronics Production | March 16, 2010

Chip industry at most profitable level since 2000

According to iSuppli, the global semiconductor business now is more profitable than it has been at any time in the last decade, reflecting the industry’s increasingly aggressive management of costs, capacity and competitive positioning.
Overall semiconductor supplier operating profitability rose to 21.4 percent in fourth quarter of 2009, the highest level since the fourth quarter of 2000 when it reached 24.7 percent. Industry profitability soared in 2009, rising throughout the year after falling to negative 5.3 percent in the first quarter due to the impact of the global economic downturn, according to iSuppli.

While the rebound in profitability in 2009 was partly driven by the economic and industry recovery during the year, the rise to the decade-high level was spurred by strategies and structural changes within the semiconductor industry.
“Chipmakers in 2009 reacted quickly and aggressively to meet the downturn by cutting costs and improving cash flow,” said Derek Lidow, president and chief executive officer of iSuppli. “And as the market began to turn back up, the industry showed great restraint against adding production in order to avoid any overcapacity situations. This allowed the companies to recapture their pricing power to boost profitability.”

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