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iSuppli cuts 09 chip forecast

Posted: 13 Jul 2009 ?? ?Print Version ?Bookmark and Share

Keywords:chip forecast? semiconductor revenue? electronic equipment iSuppli?

Amid lingering economic woes and continuing poor visibility into future demand trends, iSuppli Corp. is reducing its forecasts for global semiconductor and electronic equipment revenue in 2009.

Worldwide electronic equipment revenue is set to decline to $1.38 trillion in 2009, down 9.8 percent from $1.53 trillion in 2008. iSuppli's previous forecast in April predicted a 7.6 percent decline in revenue.

Global semiconductor revenue is set to fall to $198.9 billion in 2009, down 23 percent from $258.5 billion in 2008. iSuppli's April forecast called for a 21.5 percent decline.

"The global economy and technology industry have undergone a period of uncertainty and volatility," said Dale Ford, senior VP of market intelligence services for iSuppli. "With technology companies downgrading their forecasts and with little visibility into future demand trends, conditions appear to be worse than previously expected in 2009."

Major culprit
While all electronics segments are expected to suffer contractions in 2009, the automotive sector is the major culprit behind iSuppli's downgrade.

"The decline of worldwide automobile sales, particularly in North America, has had a major impact on overall electronic equipment shipments," Ford said. "iSuppli has cut its 2009 automotive electronics forecast to $75.2 billion, down 24.4 percent from $99.6 billion in 2008. This is a reduction of 3.8 percentage points from iSuppli's previous forecast."

The other five major electronic equipment categoriesdata processing, wired communications, wireless communications, consumer and industrialall had their growth forecasts revised downward by rates ranging from less than 1 percentage point to nearly 6 points, reflecting overall technology market turbulence and lack of visibility.

The figure represents iSuppli's quarterly electronic equipment and semiconductor forecasts.

The weakening outlook of the electronic equipment market has prompted iSuppli to trim its semiconductor forecast. (Click to view full image)

The chips are downbut not out.

The weakening outlook of the electronic equipment market has prompted iSuppli to trim its semiconductor forecast. However, with the start of the second half, conditions are looking up for both semiconductors and electronic equipment.

"There were signs that the economic decline was becoming less pronounced near the end of the first half," Ford said. "Even after trimming their expectations for the year, key semiconductor companies are entering the second-quarter financial reporting period with revenue guidance averaging 13 percent sequential growth compared to an overall revenue decline of 18.8 percent posted in the first quarter of 2009."

The semiconductor industry in Q1 09 was severely impacted by Japanese chipmakers, which experienced a severe decline in production during the period. However, Japan's semiconductor makers now have reduced their excess inventories and have resumed production.

After a 7.1 sequential increase in Q2, iSuppli predicts global semiconductor revenue will rise by 10.4 percent in Q3 and by 4.9 percent in Q4.

Following a 19.4 percent plunge in Q1, global electronic equipment revenue rose by 1.9 percent in Q2 and will increase by 10.4 percent in Q3 and by 8.9 percent in Q4.

Better year in 2010?
While these sequential increases won't be enough to generate annual revenue growth for chips or electronic products, they likely will pave the way for a better year in 2010.

"iSuppli is projecting the semiconductor industry will show improvements beginning in the Q4 09, which will provide the basis for overall growth of 13.1 percent in 2010," Ford said. "Global electronic equipment revenue also will rise by 4.9 percent in 2010."

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