It's the eleventh time around for any real semiconductor industry veterans. That's eleven recessions, and while this one won't be a picnic, one industry forecaster is taking some comfort from history.
He is Malcolm Penn, Chairman and CEO of Future Horizons. "Staring a global economic recession in the face, a chip market contraction is unavoidable," he says. "The only big question is how bad will it be?"
"Will it be a rerun of 2001?"
The good news is that Penn thinks not. "Everything that could have gone wrong, did go wrong," he remarks. "The 2001 collapse was triggered by the simultaneous collapse of the dot com inflated demand, the 9/11 driven economic slowdown and a massive inventory burn just as a huge amount of excess capacity was coming on stream." For those with short memories or those who prefer to forget the global semiconductor market plummeted about 30 per cent in 2001.
"This time around," argues Penn, "aside from the economy, all the other underlying trends are good. Inventories are not seriously bloated, wafer fab capacity utilisation levels are high, capital expenditure is very low and decreasing and ASPs (average selling prices) were in the midst of a long-term structural recovery phase. He believes these factors will cushion the effects of the economic slowdown.
Penn's immediate prognostication is not good. He expects Q4 this year to be down 6 per cent on Q3, which after a stronger than anticipated first half of the year, will restrict 2008 growth to 2.2 per cent.
Next year avert your eyes for the first half. Penn predicts an 8.7 per cent decline before a recovery commences in Q3. The second half rebound should restrict the downturn on 2008 to just 2009. This he says will be the harbinger for a strong rebound in 2010 driven by seasonality and the recovering world economy.
Interestingly Q3 next year is also when Brian Halla, CEO of National Semiconductor expects the market to turn. Though he did hold a finger in the air to indicate a certain nervousness about the prediction.
To obtain a complimentary copy of Malcolm Penn's report e-mail mail@futurehorizons.com
iSuppli is also predicting a 2 per cent semiconductor revenue decline in 2008 against 2007.
"The first evidence that the world semiconductor industry was entering a recession arrived in the third quarter before the financial crisis began sweeping the world in October," observes Dale Ford, senior vice president, market intelligence services for iSuppli. "We had previously predicted that the third quarter would generate 7.9 per cent growth in revenues compared to the second quarter. However actual growth for the third quarter came in at a very anemic 2.5 per cent. Year over year revenue in the third quarter was down by 2.9 per cent."
Ford noted that the whole semiconudcor industry, large and small companies, felt the pinch.
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