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Top 7 trends in bleak IC market

Posted: 16 Jun 2009 ?? ?Print Version ?Bookmark and Share

Keywords:semiconductor industry? IC market? consumer electronics?

Gartner Inc. has reiterated its gloomy IC forecast for 2009, saying that consumer demand has not returned in the market.

The IC market is projected to contract 22.4 percent in 2009, according to Gartner. This new outlook is slightly better than Q1 projection, when it said chip revenue would decline 24.1 percent in 2009.

Besides providing the forecast at an event, Peter Middleton, principal analyst at Gartner, also drew seven conclusions about the current state of the semiconductor industry.

1. Semiconductor revenues will increase sequentially.
"Industry revenues in Q1 were slightly better than expected. We had expected (a decline of minus) 17 percent quarter-over-quarter, but it came in at minus 15.7 percent or slightly better. We had forecast minus 1 percent for Q2, but it will actually be up 4.9 percent quarter-over-quarter, according to vendor guidance. Big companies such as Intel, TSMC and others reported seeing strong bookings but these tended to be in selected markets. The 3G cellular build-out and the PC sector (have) strengthened."

2. Most IC demand is from inventory restocking.
"We've seen minimal evidence that electronic equipment demand is clearly returning. There is lots of evidence that China is running strong but in other regions of the world we've seen very little evidence. So our conclusion is that the majority of the projected growth in the near-term is inventory replenishment."

3. Minimal evidence that demand is returning except in China.
"What will happen in the second half? Consumer spending we believe will remain fairly depressed due to: high unemployment, falling housing prices and still low consumer confidence."

4. Auto and consumer remain hardest hit markets in 2009.
"In 2009, we expect the worst performing category to be automotive. Consumer electronics will also perform badly. Consumer credit and spending will remain stifled."

5. Q2 09 forecast shows slight improvement over Q1 09.
"The fact that semiconductor revenues will grow sequentially in the second quarter is a welcome development. One positive sign for the industry is the impact of the stimulus and telecom spending in China, without which Q1 sales would have been even worse. Another positive is the rapid correction in the PC supply chain."

6. Manufacturing utilizations improve off Q1 09 lows.
"We expect utilization rates to increase from their lows in the 50 percent range in the first quarter. Overall utilization rates should run into the low 70 percent range by the end of the year, but will not be sufficient to drive widespread capacity additions until well into 2010, even at the leading edge. Leading edge rates will end 2009 in the 80 percent range as manufacturers fill their most advanced production first, to benefit from the minimum costs, and maximum profits brought about by smaller feature sizes."

7. Manufacturing equipment decline accelerates in 2009.
"In manufacturing, the overall fab utilization plunged through Q1, with foundries faring much worse than the IDM facilities. However we are expecting strong improvement off of these lows reflecting the speed at which the industry has worked off excess inventory. In the manufacturing equipment space we expect only essential purchases to be approved in 1H 2009, with a market pick-up in 2H 09 caused by return in technology buys sustainable recovery possible in 2H 10."

- Mark LaPedus
EE Times

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