Gartner: 2009 a dismal year for the worldwide chip industry

Despite recent quarter-over-quarter increase, 2009 chip sales projected to fall by $29 billion

The worldwide semiconductor industry hit such a slump in 2009 that it will likely go down as one of its steepest sales declines since 1985, according to Gartner Inc.

The Stamford, Conn. research firm issued a report this week projecting that worldwide semiconductor revenues will total $226 billion in 2009, 11.4% -- or $29 billion -- less than in 2008. Gartner noted that the 2009 results mark the first time ever that semiconductor sales declined two years in a row.

"Revenue dropped precipitously in the first quarter of 2009, continuing a deterioration which started in the last quarter of 2008," said Stephan Ohr, semiconductor research director at Gartner, in a statement.

Special report: Looking back at 2009, ahead to 2010
Special report: Looking back at 2009, ahead to 2010

Gartner's projection comes about a month after investment house Morgan Stanley cut its rating on the semiconductor industry from "attractive" to "cautious," while also downgrading the likes of Intel. Corp., Nvidia Corp. and Micron Technology Inc.

At the time, Morgan Stanley analysts Mark Lipacis and Sanjay Devgan wrote in a note that rising inventories and concerns about PC component sales drove them to be more cautious about the industry.

This is particularly bad news for industry watchers who have been predicting that the semiconductor market will lead the U.S. economy out of the mire it's been in the past few years.

Gartner noted that the industry saw a slight uptick toward the end of the first quarter and realized quarter-over-quarter growth throughout the rest of 2009. But that growth still wasn't enough to lift the industry out of the doldrums, it added.

Just last month IDC had reported that worldwide computer chip shipments skyrocketed in the third quarter compared to the second quarter. The IDC report noted that after chip makers had struggled through quarter after recent quarter over the past couple of years, third quarter PC microprocessor shipments jumped 23%.

Nonetheless, the full year wasn't a good one for semiconducor makers.

"Yes, it was a bad year for the semiconductor segment," said Dan Olds, an analyst for The Gabriel Consulting Group. "However, it's interesting to note that the pain was not universal." He cited Gartner's projection that Samsung's 2009 sales will grow by 2.55% while Intel's sales will decline by "only" 5.4%, "while others like STMicroelectronics and Renesas were down much more."

Gartner said that Hynix Semiconductor and Qualcomm also showed revenue growth of 2.3% and 0.4% respectively.

The companies hit the hardest this year were Infineon Technologies, whose sales are expected by Gartner to fall by 46.5% drop, and Renesas Technology, whose decline is said to total 19.9%. Advanced Micro Devices Inc. is projected to take a 10.1% hit this year, according to Gartner.

"AMD and Intel were definitely impacted by lower demand in PCs and servers," said Olds. "However, I think there is a chance for a recovery in 2010 as demand picks up. I think that consumer sales will pick up if confidence returns. Business sales will recover a bit in any case, as businesses have postponed purchases that they will have to make at some point."

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