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Friday, December 12, 2008
Gartner Says Worldwide Semiconductor Revenue Declined $12 Billion in 2008


For only the fifth time in the

"In the last quarter of 2008, market conditions deteriorated significantly, and as the fourth quarter has progressed, many vendors have issued updated guidance for the quarter, reflecting weakening market conditions," said Andrew Norwood, research vice president at Gartner. "Unfortunately for vendors, 2009 is going to be considerably worse. Some have compared the precipitous decline in semiconductor demand to that of the 2001 ?dot-com? bubble. However, unlike 2001, this economic downturn is much more broad-based and not limited primarily to the technology sector."

"Given this increased uncertainty, all semiconductor companies should be focused on cash preservation and inventory management," Mr. Norwood said. "While gross margin for IDMs (integrated device manufacturers) will show significant declines owing to underutilized factories, focusing on inventory now should help the recovery when demand returns. This is also an excellent opportunity for the larger companies with stronger balance sheets to make strategic acquisitions."

Intel held the No. 1 position for the 17th consecutive year, and it increased its market share to 13.1 percent in 2008. However, Gartner?s 2007 revenue includes Intel?s NOR flash memory business that was spun off in the second quarter. Comparing only continuing operations, Intel?s revenue grew 6.5 percent, beating the market average by nearly 11 percentage points.

Qualcomm experienced the strongest growth rate among the top 10 vendors, as its revenue increased 15 percent in 2008. The company was driven by strong growth the first three quarters of the year. However, Qualcomm felt the impact of the economic downturn in the fourth quarter of 2008 as carriers and OEMs reduced their inventory of CDMA-based devices and chipsets.

Hynix Semiconductor suffered the steepest decline among the top 10 semiconductor vendors in 2008, as revenue dropped 29.7 percent. Hynix was one of the companies that was hit hardest by the price drop of DRAM and NAND, which was caused by excess supply. All vendors focused on the DRAM and NAND flash markets experienced strong revenue declines due to oversupply and strong price reductions.

Another vendor that struggled during 2008 was Infineon Technologies.

"Infineon had a tough year as its memory subsidiary, Qimonda, which it is looking to divest, is becoming marginalized within the DRAM industry" Mr. Norwood said. However, not all of its problems were related to DRAM. The German manufacturer saw a boardroom coup that lead to the ousting of its CEO, Dr Wolfgang Ziebart. On a positive note, the company saw some high-profile design wins in Apple?s 3G iPhone.

Additional information is available at http://www.gartner.com/DisplayDocument?ref=g_search&id=835736&subref=simplesearch.


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