Chip Sales Plummeted 25% in a Year, SIA Report Says

Chip sales plummeted 25 percent between April 2008 and April 2009, as the semiconductor industry continued to deal with the fallout from the recession in the United States and a slowing global economy, according to a new report.

In its June 1 report, the Semiconductor Industry Association found that global sales of processors fell from $20.9 billion in April 2008 to $15.6 billion in April 2009. This loss of revenue stems in part from businesses not replacing aging hardware, such as PCs and server systems, as corporate IT budgets continue to tighten.

However, the SIA report did offer some good news. Between March and April of 2009, semiconductor sales increased about 6.4 percent. In March, the SIA reported global chip sales of $14.7 billion. Sales of consumer gadgets, digital televisions, cell phones and PCs helped the industry achieve month-over-month growth.

"The better-than-expected 6.4 percent sequential increase in April sales was driven by moderate improvements in a number of end-demand drivers and inventory replenishment," SIA President George Scalise wrote in a statement. "The PC market—a major consumer of semiconductors—has been stronger than predicted earlier in the year."

While PCs might be picking up, the SIA report found that sales to automobile makers, which represent about 7 percent of all global chip sales, remain weak. The June 1 news that General Motors is entering bankruptcy protection means that the automobile sector will continue to remain stagnant for some time.

The SIA report offered no indication of when enterprises and even small businesses might start investing in new hardware and begin to replace older equipment. The consumer market offers a more mixed picture, with sales of digital televisions and other handheld gadgets increasing although buyers are staying away from other products.

Sales of cell phones, which were originally expected to decline about 15 percent in 2009, are now expected to only decline about 7 percent, which should help the industry, according to the SIA. PCs and cell phones account for about 60 percent of all worldwide chip sales.

"Visibility remains limited," Scalise added. "Two consecutive months of sequential sales growth may be an indication of a return to more normal seasonal sales patterns in some market sectors, albeit at lower sales levels than last year."

In May, the SIA found that global semiconductor sales fell 30 percent from the first quarter of 2008 to the first quarter of 2009. A full industry recovery is not expected until at least 2010.