RealTime IT News

The Chips Were Down, Down, Down in 2008

Global semiconductor revenue fell 5.2 percent last year thanks to the fourth quarter collapse that hit the entire semiconductor sector, according to market research firm iSuppli.

To show how fast the collapse really was, iSuppli was predicting a two percent drop as late as November. Then came Christmas and silicon turned to coal.

"Everything fell apart in the fourth quarter," Dale Ford, senior vice president of market intelligence services for iSuppli told InternetNews.com. "We might have gotten low single digit growth if the fourth quarter behaved the way the fourth quarter usually does."

The annualized growth rate at the end of the third quarter, when signs of trouble began showing up, was around one percent. At the end of Q2, it was three percent.

Once again it was the memory makers stinking up the market for everyone. A combination of too many vendors and massive oversupply caused a major glut of memory even as it was being Hoovered up by flash drives, laptops and smart phones.

The memory market is starting to resemble the U.S. banking sector in terms of trainwrecks. Qimonda is out of business, Spansion is in Chapter 11 protection, and the Taiwan government just bailed out six native memory makers, taking stakes approaching 50 percent.

Memory maker Hynix posting the largest revenue decline of 33.4 percent among the major players, followed by Samsung, the world's top memory chip maker, which fell 14.2 percent in 2008.

Across the board

Even though memory makers did poorly, the rest of the industry wasn't cruising. Ford said that after taking memory players out of the 2008 results, the market was still down one percent over 2007.

"What stands out is how anemic the year was," Ford commented. "If you look at a normal cycle, we should have seen a healthier upturn. If you compare past cycles, you would have expected a stronger, healthier upturn. But this market has been dwindling down, down, down."

Some companies did achieve growth, but that was due to mergers. STMicroelectronics, Rohm and MediaTek all had major acquisitions this year. Seven firms — Qualcomm, NEC, Panasonic, Sharp, Marvell, Broadcom and Fujitsu — grew without acquisitions, although the Japanese players – NEC, Panasonic, Sharp and Fujitsu Microelectronics – got that way due to a favorable exchange rate between the Japanese yen and the U.S. dollar.

iSuppli expects to update its 2009 sales within a few weeks. Hope for a rebound, because for now, it's predicting a 21.5 percent drop, and it's not just memory. Handsets, particularly in the mid-range, and automotive semiconductor sales are expected to take a particularly hard hit.