iSuppli Cuts 2009 Projections for Electronics, Semiconductor Sectors

Research firm iSuppli said a tougher-than-expected first half of 2009 led it to downgrade its revenue projections for the electronic equipment and semiconductor industries. However, like other analyst firms, including Forrester and Gartner, iSuppli is seeing positive signs for the second half of 2009 that could bode well for a better 2010.

The semiconductor and electronics equipment sectors are the latest to see growth projections lowered.

Research firm iSuppli is predicting that both areas will see revenue declines in 2009 be steeper than initially projected, thanks in large part to the woes of the struggling auto industry.

However, they also said that both markets could see a stronger second half to 2009 and revenue growth next year.

In a report issued July 8, iSuppli analysts say they expect worldwide revenue for electronic equipment to fall 9.8 percent in 2009, from $1.53 trillion in 2008 to $1.38 trillion this year. iSuppli in April predicted a 7.6 percent drop.

For the semiconductor market, the research firm is projecting that revenue will decline by 23 percent-from $258.5 billion in 2008 to $198.9 billion this year. iSuppli's April forecast called for a 21.5 percent drop.

"The global economy and technology industry have undergone a period of uncertainty and volatility," iSuppli analyst Dale Ford said in a statement. "With technology companies downgrading their forecasts, and with little visibility into future demand trends, conditions appear to be worse than previously expected in 2009."

The troubled auto industry was the key sector that led iSuppli to downgrade its projections. The firm is calling a 24.4 percent drop in automotive electronics revenue, from $99.6 billion in 2008 to $75.2 billion this year.

"The decline of worldwide automobile sales, particularly in North America, has had a major impact on overall electronic equipment shipments," Ford said.

The slower outlook for the electronic equipment industry led to iSuppli's downward forecast for the semiconductor space.

Other analyst firms have also cut their projections for IT spending for 2009, thanks in large part to a first half of the year that was more difficult than expected. However, some, such as iSuppli, are seeing conditions that could lead to an uptick in the second half.

Gartner analysts July 7 said global IT spending will drop 6 percent for the year, more than the 3.8 percent they predicted in January.

Likewise, Forrester Research analyst Andrew Bartels said in a June 29 report that the first two quarters were even more brutal than anticipated, leading him to project that worldwide purchases of IT goods and services by businesses and governments will decline by 10.6 percent, not the 3 percent Forrester had called for earlier in 2009.

However, Bartels expected the IT industry to bottom out in the third quarter, and that the harsher first half of the year could result in a faster and steeper rebound starting in the second half and spilling over into 2010.

iSuppli is seeing the same thing. Ford said that despite the harsh first half of the year, semiconductor vendors were showing optimism for the rest of the year. iSuppli is predicting sequential growth in global semiconductor revenues of 10.4 percent and 4.9 percent in the third and fourth quarters, respectively.

Those sequential growth numbers won't lead to overall revenue increases for 2009, they could portend an improved 2010.

"iSuppli is projecting the semiconductor industry will show improvements beginning in the fourth quarter of 2009, which will provide the basis for overall growth of 13.1 percent in 2010," Ford said. "Global electronic equipment revenue also will rise by 4.9 percent in 2010."