Global semiconductor revenue predicted to decline in 2008

Global semiconductor revenue now is expected to decrease to $266.6 billion for the full year 2008, down 2% from $272.0 billion in 2007. iSuppli's previous forecast, from September, called for 3.5% growth. This will represent the first year of decline for the global semiconductor industry since the post dot-com bust year of 2001, when revenue plunged by 28.7%. “The first evidence that the semiconductor industry was entering a recession arrived in the third quarter, before the financial crisis began sweeping the world in October,” said Dale Ford, senior vice president, market intelligence services for iSuppli. “iSuppli previously had predicted that the third quarter would generate 7.9% growth in semiconductor revenue compared to the second quarter. However, actual growth in the third quarter came in at a very anemic 2.5% quarter-to-quarter rise. Year-over-year revenue in the third quarter was down by 2.9%.” The figure below presents iSuppli's forecast for global semiconductor sequential revenue growth by quarter for the period of 2007 through 2008. The revised semiconductor forecast was based on actual third-quarter quarter results of 121 leading semiconductor suppliers and on fourth quarter revenue estimates founded primarily on financial guidance provided by the major chipmakers. “Weak-to-strongly-negative growth was reported in the third quarter by the complete range of semiconductor suppliers, large and small, across all markets,” Ford noted. “However, memory suppliers are suffering the most severe declines. iSuppli expects the negative momentum to continue into the fourth quarter with the overall market expected to decline by 8.8% compared to the third quarter of 2007, or a 10.9% reduction compared to the fourth quarter of 2007.” Numerous semiconductor suppliers are reducing their fourth-quarter outlooks on an increasingly frequent basis. This would seem to indicate that there is a strong possibility that the fourth-quarter decline and the overall 2008 results could fall even further than iSuppli now forecasts. A story of fear “In discussions with semiconductor suppliers, equipment OEMs and contract manufacturers, a story of fear and great uncertainty has emerged,” Ford said. “As dramatic declines in consumer and industrial confidence began developing in late summer, order cancellations began to grow and in many cases, slowing orders degenerated into a complete stop in orders as players across the supply chain moved to extremely cautious positions in the face of increasingly negative economic news.” The psychology of many industry players now has shifted to a survival mentality, with cost-control and cash-conservation considerations driving decisions. The extremely low level of consumer confidence clearly points to a very difficult fourth quarter for the industry.