Global sales of semiconductors are likely to fall 2.2 percent in 2009 due to weak demand for electronics worldwide, industry group World Semiconductor Trade Statistics said on Tuesday, reversing its May forecast of 5.8 percent growth.

Chip giants Intel (NASDAQ: INTC) and Samsung Electronics are steeling themselves for weak computer sales in the holiday season and beyond as the economic crisis hits consumer sentiment.

The chip market will shrink to $256 billion next year, down from an expected $261.9 billion in 2008, said WSTS, whose 66 member chip makers make up roughly 80 percent of the global chip market.

Semiconductor companies worldwide are cutting output and capital spending. Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, said earlier on Tuesday that it had frozen hiring after posting its biggest decline in monthly sales.

Sales of microchips are expected to fall 9.8 percent in the Americas next year, trailed by a 3.8 percent decline in Japan and a 3.6 percent fall in Europe, the WSTS said.

Sales in the Asia-Pacific region will slow to 1.1 percent growth in 2009, down from an expected 7.6 percent growth this year.

The industry group also cut its outlook for 2008 and 2010. Chip makers now expect sales to grow an annual 2.5 percent in 2008, down from a previous outlook of 4.7 percent, as sales stall before the year-end holidays and inventory piles up, lowering prices.

The industry group also revised down its forecast for 8.8 percent growth in 2010 to 6.5 percent growth to $273 billion.

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When chip makers use fewer factory lines and equipment, this spells bad news for suppliers of microchip-making equipment such as Applied Materials and Tokyo Electron.

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