SIA Forecast: 2009 Down Almost 6%
Although visibility is limited by current questions about consumer confidence, the Semiconductor Industry Association announced yesterday its predictions of a 5.8% decline in chip sales next year.
Laura Peters, Editor-in-Chief -- Semiconductor International, 11/20/2008
In its latest industry forecast, the Semiconductor Industry Association (SIA) predicts that 2009 will see a 5.8% decline in chip sales over this year’s estimated level of $261B. Through 2011, a 2.9% compound annual growth rate (CAGR) is expected. The predictions, however, came with a caveat: “Visibility is very limited, and much will depend on how quickly public policy makers can act to restore consumer confidence,” said SIA president George Scalise during yesterday’s webcast of the SIA Annual Semiconductor Industry Global Sales Forecast.
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| A ~6% decline of the semiconductor industry is expected in 2009. |
This downturn is very unlike those of the past, particularly the 2001 downturn, according to Scalise. “There is no similarity between this and 2001,” he said. “Then, there was an excess of perceived demand throughout the semiconductor supply chain, so when the bubble burst, demand for semiconductors dropped about 30%. So we had a big hole we had to dig out of, which took a couple of years. I don’t see any chance of that happening this time around.”
Still, SIA expects the unit demand for cell phones and PCs to fall in 2009, something the industry has not seen in some time. Cell phone unit growth is expected to be 8% in 2008, contracting by 6.8% in 2009. PC unit shipments should increase 10% in 2008, but shrink by 5% in 2009. Scalise noted that 70% of new cell phones are consumed by the developing world, as are 50% of new PCs. The emerging economy is a significant and growing part of demand.
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| Fewer cell phones and PCs will ship in 2009 vs. 2008. |
Although DRAM and flash prices have remained under pressure for about 18 months, Scalise pointed to a bright spot: “If we can continue to reduce the cost to manufacture solid-state drives, they will become a major driver of demand, and we’re on the threshold of that taking place.”
Of course, it is the semiconductor equipment suppliers that are hit the hardest during correction periods. SIA expects capital expenditures to fall below $35B in 2009 from 2008’s expected level of ~$43B.
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| Capital equipment suppliers will have to manage a significant market contraction in 2009. |
Into 2009, Scalise expects visibility to remain poor, at least until the global credit crisis can be stabilized. Because consumers account for more than 50% of the semiconductors sold, consumer confidence is tied to electronics sales, including automotive electronics. “We ship 8% of product to that industry, and that market is growing,” he said. “It’s important to have a healthy automotive market. We’re hopeful that this difficult period will be short-lived.”
In light of the stimulus packages that are being debated in the United States, SIA has made some recommendations, Scalise said. First and foremost, all work being done by the U.S. Congress and the administration needs to work toward an improved economy. SIA is proposing tax measures that improve liquidity, such as allowing U.S.-based companies to return profits from abroad at a reduced tax rate. There is also the possibility of accelerating existing capital depreciation tax credits, and development of human capital tax incentives. SIA is in favor of developing green energy and broadband infrastructures, investing more in government and university research labs, and expanding tax credits for renewable energy. “The government should provide stimulus — not just for bridges and highways, but for the information economy,” Scalise said.
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