Chip Industry Revenues Drop By $12 BillionChip Industry Revenues Drop By $12 Billion

Revenue for the worldwide semiconductor industry this year plummeted by $12 billion, marking only the fifth time in the last 25 years the industry has suffered a year-to-year drop in sales, a market researcher said Friday.

Revenue totaled $261.9 billion, a 4.4% decline from 2007, according to preliminary findings from Gartner. The drop occurred as market conditions deteriorated in the last quarter, which resulted in many vendors revising guidance downward.

"Unfortunately for vendors, 2009 is going to be considerably worse," Gartner analyst Andrew Norwood said in a statement. "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."

To weather the economic slowdown, Garter said semiconductor companies would have to focus on preserving cash and managing inventory. "This is also an excellent opportunity for the larger companies with stronger balance sheets to make strategic acquisitions," Norwood said.

Intel, the leading chipmaker for the last 17 years, increased revenue by 1.1% to boost its market share to 13.1% this year. However, Gartner's 2007 revenue included Intel's NOR flash memory business, which the company spun off in the second quarter of this year. Comparing only continuing operations, Intel's revenue grew 6.5%, which beat the market average by nearly 11 percentage points.

Nevertheless, Qualcomm experienced the strongest growth rate among the top 10 vendors, as revenue rose 15%. Growth was strong in the first three quarters, but the economic downturn took its toll in the fourth quarter, as wireless carriers and mobile-phone manufacturers reduced their inventory of devices based on the vendor's chipsets.

Hynix Semiconductor suffered the steepest decline among the top 10, as revenue fell 29.7%. Hynix was one of the companies hit hardest by the drop in prices of DRAM and NAND flash memory caused by excess supply. All the vendors focused on those markets experienced strong revenue declines.

The top 10 vendors, along with market share, were Intel, 13.1%; Samsung Electronics, 6.8%; Toshiba, 4%; Texas Instruments, 3.7%; STMicroelectronics, 3.7%; Infineon Technologies, 3.1%; Renesas Technology, 3%; Qualcomm, 2.5%; Hynix Semiconductor, 2.4%; and NEC Electronics, 2.2%.