Global chip market size to fall back in 2009, says Databeans
The chip market will amount to just over US$200 billion in 2009, the size of the market nine years ago, according to Databeans.
Following several years of strong growth, 2008 saw the entire market slip 3% to US$248.6 billion in revenues, compared to US$255.7 billion a year before, data gathered by Databeans show. The industry agrees that 2009 will be undoubtedly worse due to numerous factors, such as the inventory issue that has contributed to falling ASPs and reduced profits particularly in the memory markets, the market research firm said.
However, Databeans said it foresees that it is the meager replacement rates for typically strong application categories such as mobile handsets, notebooks and consumer electronics, spurred by panic in the credit sector which have hindered consumer spending, and thus reduced demand for ICs.
While the current industry recession shows some similarities to the one that occurred in 2001, when semiconductor sales plummeted by 32.5% and took nearly three years to return to 2000 levels, Databeans believes this crisis will be far shorter lived. The primary difference is that the unprecedented growth that occurred between 1999 and 2000 caused such overcompensation in production that the following recovery followed a "bathtub effect" or a rather long and flat stabilization to return to previous profits.
Alternatively, the current crisis caused primarily by temporary macroeconomic issues will recuperate at a much faster rate, according to Databeans. After falling 17% in 2009, Databeans predicts a "V-Shaped" or "Boomerang" recovery for the semiconductor industry, with a total on-year increase of 17% from 2009 to 2010. It is predicted that by 2011, total IC sales will regain momentum and surpass the peak seen during 2007, with US$269.1 billion in revenues. Databeans believes that the market reacted swiftly to the financial meltdown and that with little inventory in the channel now, production will begin to flow again and not remain stagnant as it did in 2002.
This improved situation is not likely to happen all at once, but certain indicators show that recovery may be sooner than expected, Databeans said. The handset industry, a traditional bellwether for overall semiconductor health, is estimated to have lost nearly 20% of its sales in the first quarter, but was still considerably better than the 35% decline in fourth-quarter 2008. Nokia, the world's top handset supplier with a 38% market share, is still selling well particularly in the ever-growing smartphone category, the research firm noted. At the same time, Nokia's key chipset supplier, Texas Instruments (TI), recently announced better-than-expected sales.
China is expected to factor into IC market revival tremendously, according to Databeans. Already China's industrial output growth jumped 8.3% in March, compared to the 3.8% rise of the first two months. With low penetration rates for consumer electronics, mobile handsets and notebooks, and combined with strong cash savings, increasing Chinese consuming habits will likely be a key factor in worldwide recovery, the research firm expects.
China's technology companies have also done surprisingly well during the first quarter, even amidst the global recession, Databeans found. China Mobile, the region's leading wireless provider, managed to jump nearly 30% in profits in 2008. The company added more than 7.3 million subscribers per month last year, reaching 457 million customers and enjoys a 70% share of China's wireless market. This has been a major factor for Nokia's continued success in China, as it is China Mobile's principal partner in the country's 3G network infrastructure, Databeans indicated.
A combination of factors will gradually lead to a gradual recovery in both pricing for ICs and consumer spending habits, according to Databeans. However, 2009 will still be a difficult journey for many OEMs and semiconductor suppliers, with consolidation, reduction or restructuring on the horizon. Databeans views the situation as troubled, but still showing signs of improvement.
Following several years of strong growth, 2008 saw the entire market slip 3% to US$248.6 billion in revenues, compared to US$255.7 billion a year before, data gathered by Databeans show. The industry agrees that 2009 will be undoubtedly worse due to numerous factors, such as the inventory issue that has contributed to falling ASPs and reduced profits particularly in the memory markets, the market research firm said.
However, Databeans said it foresees that it is the meager replacement rates for typically strong application categories such as mobile handsets, notebooks and consumer electronics, spurred by panic in the credit sector which have hindered consumer spending, and thus reduced demand for ICs.
While the current industry recession shows some similarities to the one that occurred in 2001, when semiconductor sales plummeted by 32.5% and took nearly three years to return to 2000 levels, Databeans believes this crisis will be far shorter lived. The primary difference is that the unprecedented growth that occurred between 1999 and 2000 caused such overcompensation in production that the following recovery followed a "bathtub effect" or a rather long and flat stabilization to return to previous profits.
Alternatively, the current crisis caused primarily by temporary macroeconomic issues will recuperate at a much faster rate, according to Databeans. After falling 17% in 2009, Databeans predicts a "V-Shaped" or "Boomerang" recovery for the semiconductor industry, with a total on-year increase of 17% from 2009 to 2010. It is predicted that by 2011, total IC sales will regain momentum and surpass the peak seen during 2007, with US$269.1 billion in revenues. Databeans believes that the market reacted swiftly to the financial meltdown and that with little inventory in the channel now, production will begin to flow again and not remain stagnant as it did in 2002.
This improved situation is not likely to happen all at once, but certain indicators show that recovery may be sooner than expected, Databeans said. The handset industry, a traditional bellwether for overall semiconductor health, is estimated to have lost nearly 20% of its sales in the first quarter, but was still considerably better than the 35% decline in fourth-quarter 2008. Nokia, the world's top handset supplier with a 38% market share, is still selling well particularly in the ever-growing smartphone category, the research firm noted. At the same time, Nokia's key chipset supplier, Texas Instruments (TI), recently announced better-than-expected sales.
China is expected to factor into IC market revival tremendously, according to Databeans. Already China's industrial output growth jumped 8.3% in March, compared to the 3.8% rise of the first two months. With low penetration rates for consumer electronics, mobile handsets and notebooks, and combined with strong cash savings, increasing Chinese consuming habits will likely be a key factor in worldwide recovery, the research firm expects.
China's technology companies have also done surprisingly well during the first quarter, even amidst the global recession, Databeans found. China Mobile, the region's leading wireless provider, managed to jump nearly 30% in profits in 2008. The company added more than 7.3 million subscribers per month last year, reaching 457 million customers and enjoys a 70% share of China's wireless market. This has been a major factor for Nokia's continued success in China, as it is China Mobile's principal partner in the country's 3G network infrastructure, Databeans indicated.
A combination of factors will gradually lead to a gradual recovery in both pricing for ICs and consumer spending habits, according to Databeans. However, 2009 will still be a difficult journey for many OEMs and semiconductor suppliers, with consolidation, reduction or restructuring on the horizon. Databeans views the situation as troubled, but still showing signs of improvement.
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