Semiconductor Industry Estimated to Lose Over $25 bln in 2009

The widening financial crisis in Wall Street continues to reverberate around the globe. Its effects could now significantly impact the semiconductor industry as well. According to preliminary estimates from IT research and advisory firm Gartner ; worldwide semiconductor industry revenue growth in fiscal ’09 is expected to be 1%, down by approx. 7 percentage points from previous estimates.

The drop in revenue reflects not only a quick reversal and the severity of the current global economic environment ; but also underlines the fact that high-tech co.’s may no longer at this point remain shielded from the damaging effects of the current economic malaise.

Bryan Lewis, research vice president at Gartner, said:

Semiconductor growth was surprisingly strong until recently, given the very weak economic environment, but this will start to change in the fourth quarter of 2008. Mounting evidence suggests that the semiconductor industry will see negative growth starting in the fourth quarter of 2008, and that this will continue throughout most of 2009.

In the third quarter of 2008, worldwide semiconductor revenue for 2009 was forecast to be $307.7 billion, a 7.8% increase from 2008 revenue. Gartner now expects worldwide semiconductor revenue in 2009 to total approx. $282 billion, a 1% increase from 2008 revenue. These estimates remove more than $25 billion from the market where firms engage in the designing and fabrication of semiconductor devices.

Gartner also noted that PCs and mobile handsets account for approx. a third of the total semiconductor market and therefore are the biggest applications for adjusting growth. For example, Gartner said that if the system unit percentage change of PCs is lowered by 8%, that would impact semiconductor growth by 1.61%.

“In a recession, it is important to remember that there will not only be a potential reduction in the number of systems sold, but also a move to lower-cost systems with less semiconductor content,” added Mr. Lewis.

The Philadelphia Semiconductor Index (^SOXX) continues to fare poorly sinking ytd nearly 40% with a new one-year low of 202.42 from highs of 457.