Chip Industry Poised For Revenue ReboundChip Industry Poised For Revenue Rebound

Worldwide semiconductor revenue, which plummeted in the economic recession, will bounce back next year, due to a strengthening PC market, a market research firm says.

The semiconductor industry this year is on track to reach $226 billion, an 11.4% decrease from 2008, Gartner reported Monday. Despite the drop, the decline was better than Gartner's previous projection of a 17% drop in revenue.

In 2010, Gartner is predicting that revenue will bounce back to the same level as 2008, or $255 billion.

"The most significant changes for the semiconductor industry came from application-specific standard products (ASSPs), memory and compute microprocessors, as all three products benefited from a strengthening PC market," Gartner researcher Bryan Lewis said in a statement. "ASSPs and memory, primarily NAND flash, also benefited from an improved outlook for cell phones."

PCs are the single largest application driving the semiconductor rebound, Gartner said. That's because PC unit shipments this year were not as low as expected. While a double-digit decline was likely in the beginning of 2009, the current forecast is for a low-single-digit increase.

The better-than-expected PC market meant reduced revenue declines for microprocessors. The better-than-expected PC market was also good for system memory chips, called DRAM, which began to be profitable for some vendors in the third quarter of this year, after almost three years of losses.

Last month, Gartner said global PC shipments in the third quarter of this year rose 0.5% year-over-year, while rival IDC reported a 2% increase. Gartner had predicted a 5.6% decline for the period.

Nevertheless, 2010 is unlikely to start with a bang. "While most of the news has been positive to date, recent channel checks in Taiwan indicate there is concern that PC orders are slowing earlier than the seasonal norm and that 2010 may get off to a slow start," Lewis said.

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