Where’s the Demand?
Spending on Analog and Discrete Components Evaporates
Global analog and discrete component market revenue in the fourth quarter declined by an average of 22 percent, putting suppliers in an unenviable position, according to iSuppli Corp.
The early prognosis for the first quarter of 2009 doesn’t appear too optimistic either — with revenue expected to decline by as much as 20 percent. iSuppli Corp is forecasting a revenue decline of about 29 percent for all of 2009.
Analog and discrete suppliers are taking different measures to survive in this harsh economic environment. While major price declines are expected in such a downturn, the average for both analog and discrete companies has been a precipitous decrease of 7 percent to 10 percent, respectively.
iSuppli has heard the same comment from many suppliers: “There’s no reason to further reduce prices because there’s no demand.” Some of the suppliers sporadically have reduced prices more severely than others in order to dislodge their excess inventories, but this has not been the general trend.
Production in many facilities has declined to accommodate almost non-existent demand. Utilization rates dropped to low 40 percent range in the first quarter of 2009 and are expected to stay at that level for the next several months.
Because the industry is shrinking and the utilization has been dropping to low levels, iSuppli expects to see a consolidation of fabs. Although times are tough, capacity is not expected to shrink to match the low utilization levels. Some semiconductor manufacturing capacity will disappear, but not to such a degree as to cause shortages during the next two years.
On the bright side, a moderate increase in demand is expected during the third quarter of 2009.
The discrete semiconductor business is much more vulnerable on the whole than analog simply because many of these parts have commodity status.
Market shares for many suppliers did not drastically change from 2007 to 2008. However, iSuppli believes there will be a change of the supplier landscape in 2009 as in the low demand will render many suppliers unprofitable and place them on the verge of nonexistence.
Global analog and discrete component market revenue in the fourth quarter declined by an average of 22 percent, putting suppliers in an unenviable position, according to iSuppli Corp.
The early prognosis for the first quarter of 2009 doesn’t appear too optimistic either — with revenue expected to decline by as much as 20 percent. iSuppli Corp is forecasting a revenue decline of about 29 percent for all of 2009.
Analog and discrete suppliers are taking different measures to survive in this harsh economic environment. While major price declines are expected in such a downturn, the average for both analog and discrete companies has been a precipitous decrease of 7 percent to 10 percent, respectively.
iSuppli has heard the same comment from many suppliers: “There’s no reason to further reduce prices because there’s no demand.” Some of the suppliers sporadically have reduced prices more severely than others in order to dislodge their excess inventories, but this has not been the general trend.
Production in many facilities has declined to accommodate almost non-existent demand. Utilization rates dropped to low 40 percent range in the first quarter of 2009 and are expected to stay at that level for the next several months.
Because the industry is shrinking and the utilization has been dropping to low levels, iSuppli expects to see a consolidation of fabs. Although times are tough, capacity is not expected to shrink to match the low utilization levels. Some semiconductor manufacturing capacity will disappear, but not to such a degree as to cause shortages during the next two years.
On the bright side, a moderate increase in demand is expected during the third quarter of 2009.
The discrete semiconductor business is much more vulnerable on the whole than analog simply because many of these parts have commodity status.
Market shares for many suppliers did not drastically change from 2007 to 2008. However, iSuppli believes there will be a change of the supplier landscape in 2009 as in the low demand will render many suppliers unprofitable and place them on the verge of nonexistence.
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