Gartner Says Worldwide Semiconductor Revenue On Pace to Decline 24 Percent in 2009

Analysts Say the Industry Will Fail to Return to 2008 Revenue Totals Through 2013

STAMFORD, Conn., February 25, 2009 — The impact of the financial crisis will result in the semiconductor industry experiencing near record revenue declines in 2009, according to Gartner, Inc. Worldwide semiconductor revenue is forecast to reach $194.5 billion in 2009, a 24.1 percent decline from 2008 revenue.

Market conditions have worsened since Gartner’s previous semiconductor outlook in mid-December of 2008. At that time, Gartner had forecast 2009 revenue to decline 16 percent.

The industry is expected to return to positive growth in 2010, growing 7.5 percent, followed by additional growth through 2012. Even with three years of increased revenue, the semiconductor industry will fail to return to 2008 revenue totals. In 2012, the worldwide semiconductor revenue is projected to reach $253.4 billion, still below 2008 revenue of $256.4 billion.

“We believe that the financial crisis has reset the semiconductor market,” said Bryan Lewis, research vice president at Gartner. “After the 2001 recession, in which semiconductor sales plummeted by a record 32.5 percent, semiconductor sales took about four years to get back to 2000 levels.

“The rebound after this recession will be similar to that in 2001 because there will be three years of modest growth after the worst year. However, we see a difference in year four, where we expect another overcapacity situation for the industry, especially in DRAM, because of significant manufacturing investments made in the second and third years of the recovery,” Mr. Lewis said.

Memory, specifically DRAM, is still a wild card in the semiconductor forecasts for 2009. DRAM suppliers lost more than $13 billion in 2007 and 2008. Some DRAM companies are starting to go bankrupt and other leading suppliers are substantially reducing supply. This reduced supply should lead to significant price increases in the second half of 2009.

Worldwide semiconductor revenue is expected to fall by at least 17 percent sequentially in the first quarter of 2009. There is a strong possibility that the first quarter of 2009 could be worse, and if the market continues with moderate declines in the second and third quarters of 2009, the industry could face a record annual decline. Gartner analysts warned that Gartner’s negative scenario could reach a 33 percent decline in 2009.

“Semiconductor suppliers should prepare for Gartner’s negative scenario of a 33 percent decline in 2009 revenue,” Mr. Lewis said. “Tight control of expenses is essential, but suppliers should reconsider dropping their overall research and development (R&D) budgets because focused R&D investments in the recession will help determine the winners in the upturn. Outsourcing and partnerships can help companies get the most from their R&D budgets.”

Gartner has removed solar revenue from its semiconductor forecast because solar cells are not traditional semiconductor devices (solar cells focus on energy generation and are not components in an electronic system), and their high growth rates were distorting the true growth of the semiconductor industry. Gartner is expanding its coverage in solar and will provide detailed technology forecast breakouts in a separate report.

Additional information is available the Gartner report “Dataquest Alert: Forecast, Semiconductor Revenue, Worldwide, 2009-2013." The report is available on Gartner’s Web site at http://www.gartner.com/DisplayDocument?ref=g_search&id=896012&subref=simplesearch.

About Gartner:
Gartner, Inc. (NYSE: IT) is the world's leading information technology research and advisory company. Gartner delivers the technology-related insight necessary for its clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to technology investors, Gartner is the indispensable partner to 60,000 clients in 10,000 distinct organizations. Through the resources of Gartner Research, Gartner Consulting and Gartner Events, Gartner works with every client to research, analyze and interpret the business of IT within the context of their individual role. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 4,000 associates, including 1,200 research analysts and consultants in 80 countries. For more information, visit www.gartner.com.

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