Industry Downturn No. 11 Won’t Be as Bad as No. 10
Though chip market contraction is inevitable for 2009, according to Future Horizons' Malcolm Penn, it will not be a repeat of the deep, drawn-out industry downturn of 2001.
Staff -- Semiconductor International, 11/20/2008 12:29:00 PM
Just as people can’t help but compare the current global economic recession to the Great Depression, reviewing the semiconductor industry’s current downturn with respect to the dot-com bust of 2001 is inevitable. But Malcolm Penn, chairman and CEO of industry analyst Future Horizons (Kent, UK), contends that the inevitable chip market contraction in 2009 will be neither as deep nor as long-lasting as the 2001 downturn.
“The 2001 slowdown was triggered by both demand and supply-side issues simultaneously -- namely the collapse of the dot-com inflated demand euphoria, a 9-11 driven economic slowdown, and a massive inventory burn just as a huge amount of excess capacity was coming on stream,” Penn said in conjunction with his November global semiconductor report. “Entering 2009, the circumstances are completely different.”
Pre-slowdown utilization rates were ~90%, Penn pointed out, meaning the industry had no serious overcapacity issues heading into the downturn. “Second, prior to the financial meltdown, there was little sign of inflated demand, with IC units running at or below the 10% per year long-term trend line and no serious excess inventory in the supply chain,” he added. “This means we ‘only’ have to deal with the impact of the global economic slowdown. The biggest problem here is the world is confused, uncertain and divided on how this will play out; in short, nobody really knows what the outcome will be.”
Although the chip market held up relatively well in the first half of this year, the second half has been a different story, with September marking the start of the 11th semiconductor industry downturn, according to Penn. With the final quarter of the year expected to see a 6% drop over Q3, Future Horizons predicts 2.2% growth overall for 2008, year over year.
The situation will continue to get worse before it gets better, with the first half of 2009 expected to be down 8.7% over the second half of 2008, according to Future Horizons. But then the recovery should start to kick in by Q3, making the full-year market down ~2%, year over year, Penn said.
“2010 should then see a strong market rebound, driven by seasonality and the green shoots of a recovering world economy,” Penn said. He also noted that the 2010-2011 rebound could be much stronger than most people expect.
