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Gartner Sees Big Semiconductor Rebound in 2010

The big spike in PC builds in the year's second half helped to drive demand for parts and partially offset the huge drop in semiconductor sales earlier in the year, according to Gartner.

Better yet, it sees a rebound coming as soon as next year.

As a result of unexpectedly high PC build demand, the industry could see a smaller-than-expected loss this year -- with revenue coming in at $226 billion. That's down 11.4 percent from 2008 revenue, but better than its forecast just one quarter earlier, when Gartner expected 2009 sales to decline by 17 percent.

Better yet, the research firm thinks 2010 revenue will continue to recover and that semiconductor revenue will match 2008 levels at $255 billion. This would be a 13 percent increase from 2009.

It's still off from the peak of semiconductor sales in mid-2007, noted Bryan Lewis, research vice president at Gartner. But it's still a pretty substantial recovery.

"The downside [projection] has improved," he told InternetNews.com. "The primary reason is the PC market went from double-digit negative to single-digit positive. That's really the key right there."

"Cell phone sales have improved as well," he added. "High-tech spending overall has been pretty strong, considering what we're in right now."

China in particular has had a big factor in driving sales, thanks to a stimulus program that drove netbook and LCD TV sales. But Lewis also said that price elasticity in laptops worldwide is helping get people buying PCs.

Despite the massive launch program by virtually every PC OEM timed with the October release of Windows 7 -- so massive it even sparked concerns of a parts shortage -- Lewis does not feel Windows 7 is the reason people are buying.

"It's more people buying PCs when the PCs are breaking. A lot of PCs are getting old and need replacing," he said.

Gartner projects a 13 percent increase in semiconductors in 2010, which will erase 2009's 11.4 percent drop, and then some.

"It's not out of the norm and looks reasonable," said Lewis.

Still, Gartner is hedging its bet a little, expecting a 6 percent drop in the first quarter -- though the first quarter is typically one of contraction in the industry, when it lets old inventory run down between the holiday rush and the next refresh of products, which comes in the spring/summer.

The increase will be across the board, even among memory makers, who have been bleeding money.

"Things have gotten better in DRAM and flash. That's a lot of the upside. There's no doubt that pricing has firmed and DRAM vendors are starting to be profitable," Lewis said. "The PC market came back put a lot of demand on DRAM and helped firm up prices."