Gartner: Chip industry faces dismal outlook

Worldwide semiconductor revenue will fall 26 per cent this year to US$168.1 billion from last year’s figure of US$226 billion, according to a report released Friday by analyst Gartner Inc.

Early reports from large semiconductor companies providing chips for PCs, storage and communications devices suggest that the second half of the year will be dismal for the industry, Gartner said.

Three factors which signal the poor state of the semiconductor market are low component prices, weak demand for electronic system components and short device lead times. Any improvement in these factors could indicate an upturn in the industry, but the timing of this remains uncertain, Gartner said.

Overall semiconductor prices continued to decline in May and June and prices for memory products remain under pressure, according to Gartner.

Going into the third quarter, some areas of the market are showing positive signs, according to Gartner. The U.S. consumer products market is strong, and sales of video game hardware, software and accessories there are rising. But seasonal year-end demand for PCs and mobile phones has not begun and there is too much unsold inventory in these categories, Gartner said.

There are some reports from Asia-Pacific that orders from U.S. and European companies for motherboards, notebook PCs and even cellular phones are increasing, which could mean that the market bottom was reached in the second quarter, Gartner said.

The world’s three largest contract semiconductor manufacturers all posted weak financial results recently. United Microelectronics Corp. of Taiwan and Singapore-based Chartered Semiconductor Manufacturing Ltd., both posted significant losses for their most recent quarters, while the largest of the three, Taiwan Semiconductor Manufacturing Corp. (TSMC) only managed to stay in the black due to an exceptional tax credit.

Gartner, in Stamford, Conn, is at