The chip recovery is under way, with quarterly sales forecast to increase year-over-year for the first time in 2009, according to a report from market researcher iSuppli on Tuesday.
Revenue from chip sales is expected to rise by 10.6 percent in the fourth quarter compared to the same period in 2008. This would mark the first time this year that revenue has risen compared to the same period a year earlier, according to Dale Ford, senior vice president, market intelligence, for iSuppli.
"The seeds of the current recovery were sown in the second quarter," said Ford. At that time, manufacturers began to report positive book-to-bill ratios, indicating future revenue growth. This was followed by more sequential revenue growth in the third quarter, according to Ford.
Semiconductor inventories returned to more normal levels in the third quarter after chip suppliers shed stockpiles, he added.
Earlier this month, chip giant Intel said third-quarter revenue was down only 8 percent year-over-year, an improvement over the 15 percent and 26 percent year over year declines in the second and first quarters respectively. Intel also indicated that it expects future growth. "We're finished with the cutting phase of our efficiency effort and now in the growth phase of that efficiency effort," said Intel's chief financial officer Stacy Smith at that time.
Overall, it's been a tough year, however. Global semiconductor revenue is set to contract by 16.5 percent in 2009, following a 5.4 percent decrease in 2008.
And iSuppli has added a good dose of caution to its report. Though sequential quarterly increases in revenue will continue into 2010, sales growth will not be sufficient to lift semiconductor revenue back to pre-recessionary levels until the 2011-2012 time frame, according to Ford.
And there are troubling indicators such as the climbing U.S. unemployment rate, which reached 9.7 percent in August and is projected to exceed 10 percent at its peak, which will continue to constrain consumer spending, Ford said.
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.
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