EL SEGUNDO, CA – Amid rapidly deteriorating conditions in the global economy and electronics value chain, iSuppli Corp. now predicts worldwide semiconductor revenue will decline in 2008 compared to 2007.
 
Global semiconductor revenue now is expected to decrease to $266.6 billion for the full year, down 2% year-over-year. iSuppli's previous forecast in September called for 3.5% growth.
 
iSuppli’s forecast tracks with an announcement yesterday by World Semiconductor Trade Statistics group, made up of 66 semiconductor manufacturers, that lowered its global sales estimates to a 2.2% drop in 2009, to $256 billion.
 
“The first evidence 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 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%.
 
“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.
 
Memory suppliers are suffering the most severe declines, with the overall market expected to drop 8.8% compared to last year.
 
Numerous semiconductor suppliers are reducing their fourth-quarter outlooks on an increasingly frequent basis, says iSuppli. This would seem to indicate there is a strong possibility the fourth-quarter decline and the overall 2008 results could fall even further than iSuppli now forecasts.
 
“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, according to the firm. The extremely low level of consumer confidence points to a difficult fourth quarter for the industry. The remaining questions are how deep and how long this decline will extend in 2009 and possibly 2010.”