Nanotech - The Circuits Blog

Global sales of chips sank 9.8 percent in November, underscoring the impact the worldwide economic crisis is having on chipmakers, the Semiconductor Industry Association said Friday.

The San Jose, Calif.-based trade group said worldwide sales of semiconductors fell in November to $20.8 billion, a decline of 9.8 percent from November 2007 when sales were $23.1 billion.

Sales were down 7.2 percent from the $22.4 billion in October, according to the SIA.

Memory chips are putting the biggest damper on growth. Excluding memory, there was a slower year-on-year decline of 4.8 percent to $17.3 billion from $18.2 billion, the SIA said. "The memory market, which has been under severe price pressure throughout the year, has seen sales decline significantly while many other product sectors have year-to-date sales above 2007 levels," SIA President George Scalise said in a statement.

Micron Technology, the largest U.S. maker of memory chips, posted a net loss of $706 million last month due to an oversupply of memory. And Taiwan's memory chip industry has been seeking rescue funds from the government because of deteriorating market conditions.

For the first 11 months of 2008, sales were $232.7 billion, a slight increase of 0.2 percent from the first 11 months of 2007 when sales were $232.2 billion. And excluding memory products, year-to-date sales jumped 5.6 percent.

"We expect the industry will remain the second largest exporter in the U.S. for 2008," Scalise added.

The Semiconductor Industry Association said Monday that global sales of semiconductors declined by 2.4 percent in October as memory products saw the steepest declines.

This follows an SIA report last month that said chip sales in the fourth quarter, historically a strong time period for the microelectronics industry, are expected to decline by 5.9 percent from the previous quarter.

Monday's report said that global sales of semiconductors declined by 2.4 percent in October to $22.5 billion against sales of $23.0 billion in October 2007. October sales were off by 2.1 percent compared to the $23.0 billion in September 2008.

Memory products--such as flash--have been the hardest hit and are dragging down other chip sectors. If memory is excluded, industry sales increased by 3.8 percent compared to October 2007 but declined by 1.4 percent compared to September 2008, the SIA said.

NAND flash--used in digital cameras, digital music players, and solid state drives--sales were off by nearly 41 percent in October compared to a year ago. DRAM memory was off 14 percent.

Memory manufacturers, including Micron Technology and South Korea's Hynix, have been struggling in the face of sales declines. Micron said in Ocotober that it would stop making NAND flash memory at a joint Intel-Micron facility in Boise, Idaho and cut 15 percent of its workforce. Hynix, meanwhile, has been trying to sell off a 36 percent stake in its operations.

"The slowdown in worldwide semiconductor sales that became evident in September continued in October," said SIA President George Scalise in a statement. "The worldwide financial turmoil is expected to continue to impact demand for semiconductors as we enter 2009," he said.

The SIA report last month projected that 2009 sales will decline by 5.6 percent to $246.7 billion before resuming growth in 2010, the first decline in global chip sales since 2001.

In 2009, PC unit shipments are projected to fall by 5 percent and cell phone unit shipments are expected to be down by 9 percent. These two categories account for approximately 60 percent of total demand for semiconductors, the SIA said Monday.

The world's largest chip manufacturers such as Intel and Taiwan Semiconductor Manufacturing Company (TSMC) have both said they expect a sharp drop in revenue in the fourth quarter.

The SIA reiterated what it said last month: sales were trending up until October. Sales for the first ten months of 2008 were $216 billion, an increase of 2.6 percent from the first ten months of 2007 when sales were $210 billion.

Correction, 10:46 a.m. PST: This story misstated the day the SIA made its announcement. It is Wednesday.

The Semiconductor Industry Association said Wednesday it is projecting the first decline in global chip sales since 2001.

SIA projects that 2009 sales will decline by 5.6 percent to $246.7 billion before resuming growth in 2010.

The forecast projects sales this year of $261.2 billion, a 2.2 percent increase from sales of $255.6 billion last year. But sales in the fourth quarter, historically a strong time period for the microelectronics industry, are expected to decline by 5.9 percent from the previous quarter, the SIA said.

The near-term prospects reflect comments from Taiwan Semiconductor Manufacturing Company (TSMC)--the largest contract chip manufacturer--at the end of last month and a fourth-quarter warning last week from Intel.

TSMC said that it expects to see a 20 percent drop in revenue in the fourth quarter as the "supply chain"--the myriad companies that order chips from TSMC--reduces "inventory very aggressively."

Intel said revenue will come in "significantly weaker" than expected across all its market segments.

"The current global economic turmoil is clearly having a significant impact on semiconductor sales," said SIA President George Scalise in a statement. "The fortunes of the semiconductor industry are increasingly tied to consumer spending on electronic products. Consumer purchases now drive well over half of worldwide semiconductor sales."

The SIA statement Wednesday cited a recent Deutsche Bank report that estimates personal computer unit sales will decline by 5 percent and cell phone unit sales will decline by 6.4 percent in 2009, with declining sales across all geographic regions. PCs and cell phones together account for approximately 60 percent of worldwide semiconductor consumption.

The semiconductor industry has enjoyed six years of uninterrupted growth since the dot-com collapse in 2001, according to the SIA. "There are few similarities between 2001 and the current conditions," said Scalise.

"The collapse of semiconductor sales in 2001 was driven primarily by the implosion of 'dot.com' industries which resulted in an enormous inventory overhang," he said. "Excess inventory is not an issue today, and the industry is well positioned to resume growth quickly once the current worldwide economic uncertainty subsides," Scalise said.

Sales will grow by 7.4 percent in 2010 to $264.9 billion and by 7.5 percent in 2011 to $284.7 billion, the SIA said.