Semiconductor Revenues Dip by $12 Billion

by CXOtoday Staff    Dec 16, 2008

The semiconductor sector has registered a decline of $12 billion in revenues over the past year. The study carried out by Gartner said that the industry for the fifth time in the last 25 years will post a decline in revenue.

The industry achieved $261.9 billion in 2008, which is a 4.4 per cent decline from 2007- said the preliminary results from Gartner. In the last quarter of 2008, market conditions deteriorated significantly, and as the fourth quarter has progressed, many vendors have issued updated guidance for the quarter, reflecting weakening market conditions, said Andrew Norwood, research vice president at Gartner.

Hynix Semiconductor suffered the steepest decline among the top 10 semiconductor vendors in 2008, as revenue dropped 29.7 percent. Hynix was one of the companies that was hit hardest by the price drop of DRAM and NAND, which was caused by excess supply. All vendors focused on these areas experienced strong revenue declines due to oversupply and strong price reductions.

Unfortunately for vendors, 2009 is going to be considerably worse. Some have compared the precipitous decline in semiconductor demand to that of the 2001 dot-com bubble. However, unlike 2001, this economic downturn is much more broad-based and not limited primarily to the technology sector, said he.

According to Norwood- the gross margin for IDMs (integrated device manufacturers) will show significant declines owing to underutilized factories, focusing on inventory now should help the recovery when demand returns. This is also an excellent opportunity for the larger companies with stronger balance sheets to make strategic acquisitions.