Only Slightly Chipping Away

Ars Technica reports: The tech industry has weathered the economic storms of 2008 to date with remarkable aplomb, but signs indicate that the market turmoil of the past three quarters is finally about to take its toll. Yesterday, the Semiconductor Industry Association (SIA) issued a statement projecting a drop in semiconductor sales for 2009. The association hasn't predicted a year-on-year decline since 2000, when it forecast a drop in 2001 sales due to the implosion of the dot-com bubble. In this case, the drop is far more modest (sources indicate that semiconductor revenue fell from $220 billion in 2000 to $150 billion in 2001). The SIA believes worldwide semiconductor sales will fall from an estimated $261.2 billion in 2008 to $246.7 billion in 2009, or some 5.6 percent.

The decline, if the SIA is correct, will hit both the PC computer and cell phone markets, with PC sales falling five percent and cell phone sales down 6.4 percent. At this point the industry group is projecting just a single-year downturn, and believes the market will grow by 7.4 percent in 2010 and 7.5 percent in 2011. The SIA expects the short-term fall-off to follow a fundamentally different recovery curve than the 2000-2001 plunge. "The collapse of semiconductor sales in 2001 was driven primarily by the implosion of 'dot.com' industries which resulted in an enormous inventory overhang," said SIA president George Scalise. "Excess inventory is not an issue today, and the industry is well positioned to resume growth quickly once the current worldwide economic uncertainty subsides."

To say the market is currently giving mixed signals is an understatement. Just over a month ago, Intel was cautiously bullish on Q4, projecting 10.1-$10.9 billion in revenue. Last week, however, the company sharply reversed on those projections, and now expects Q4 revenue of just $9 billion, plus or minus $300 million. That decline, according to Intel, is due to "significantly weaker than expected demand in all geographies and market segments. In addition, the PC supply chain is aggressively reducing component inventories." Gross margins have also been affected; Santa Clara predicts a 55 percent margin now, instead of the 59 percent it had initially targeted. (Both of these values are given with the standard disclaimer "plus or minus a couple of points.")

TSMC also reported CPU shipments down 20 percent at the end of October, but, on the other hand, we've got HP offering a "preview" of its relatively strong fourth-quarter results. The SIA is currently projecting a 5.9 percent drop in Q4 sales as compared to Q3, despite seasonal trends that would normally boost Q4. If the mid-quarter projections rolling in thus far are accurate, the tech industry's days of fiddling while Wall Street burned are over.

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