Semiconductor spending to fall to six-year low

How low can the semi-conductor industry get? That was the central question posed by market analyst iSuppli in its latest investigation into global spending on the PC components.

After a dismal 2008, it will get even worse in 2009, concluded iSuppli in its latest bulletin. Spending will fall to its lowest level in six years as global economies weaken and the chip and electronic equipment markets feel the pain.

iSuppli said worldwide capital spending by chip makers on semiconductor manufacturing equipment will fall 17.6 per cent from 2008, putting the total at $35.2bn, a level not seen since 2003.

The decline in 2009 revenue will extend the downturn seen in 2008, in which the decline accelerated rapidly in the third quarter, said iSuppli’s chief analyst for semiconductor manufacturing, Len Jelinek.

“At the start of the second quarter, suppliers were still reeling from the sharp cuts in capital expenditures from the major memory chip suppliers,” said Jelinek.

This depressed capital expenditures in 2008 even further, with virtually no semiconductor supplier continuing to spend at historical rates. By the end of the third quarter, market demand virtually stopped as global uncertainty created a suffocating atmosphere of fear.

“Threat of the collapse of the financial markets threw consumers into a tailspin,” said Jelinek.

The bad news spread through the electronic supply chain, causing sales and profits to nosedive.

“The impact on semiconductor manufacturing was immediately apparent, with falling factory use and significant reductions in capital spending, especially for capacity expansions,” he said.

Despite this, Jelinek remained optimistic for the future.

“The chip market eventually will rebound as the global economy stabilises and consumers regain confidence,” said Jelinek.