The $300B Jinx

Whatever happened to the $300B
semiconductor industry?

Gartner Inc. analysts today (Feb.
25) issued a report worth noting, predicting that semiconductor
revenues will decline between 24.1% and 33% this year. If the
optimistic minus 24.1% scenario holds up, semiconductor
revenues will be $194.5B this year.

The veteran Gartner analyst Bryan
Lewis warned, “Semiconductor suppliers should prepare for
Gartner’s negative scenario of a 33% decline in 2009
revenue.”

In a sense, we’ve been here
before. Chip revenues declined by 32.5% in 2001, and then took four
years before industry revenues got back to 2000 levels. Lewis said
it may be a similar story this time around, with the industry
growing by 7.5% next year and clawing its way back to $253.4B in
revenues by 2012.

In short, Gartner is predicting that
2012 revenues will still be below 2008 revenues of $256.4B.

Perhaps the chip industry is
suffering from the $300 Billion Jinx. Some 14 years ago, analysts
began throwing around the $300B number as a reasonable target.
Gartner (then Dataquest) entitled its 1996 semiconductor conference
with the now-humorous tag line, “$300 Billion Challenge: Let the
Games Begin.”

The chip industry promptly went into
a recession, shrinking two out of the next three years. Then a
serious downturn hit in 2001.

After that three-year debacle, one
would think that someone with the experience of SIA president
George Scalise would have been smart enough to not mention a $300B
chip industry again. But he did. No sooner did the industry have a
good year (growing 45% in 2004) than the Semiconductor Industry
Association issued a press release in November 2005 saying,
“The new forecast projects that worldwide sales of microchips
will reach $309B in 2008.” It was all perfectly reasonable:
the SIA cited drivers such as smart cellphones, wide-screen TVs,
and laptops.

And we all now know what happened in
2008, starting in March when rumors of failure caused the Bear
Stearns investment bank to go kaput.

My suggestion is that whenever
anyone so much as mentions a $300B chip industry, the nearest
curmudgeon should take his laptop computer (or cellphone or
wide-screen TV) and briefly raise it above said optimistic person
in a reproachful manner.

It’s gonna happen, but
let’s just not talk about it.