Semiconductor sales fell by 22%

Semiconductor sales fell by 22% in December, SIA reports

"A resumption of sales growth will depend in part on the effectiveness of various measures now under consideration by the federal government to restore consumer confidence, improve liquidity, and stimulate economic growth," SIA President George Scalise said.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 2/2/2009

As expected, December 2008 saw a massive drop in chip sales, bringing down the full year's results with a 22% year-over-year decline in revenues for the month.

According to the SIA (Semiconductor Industry Association), sales fell from $22.3 billion in December 2007 to $17.4 billion in December 2008. December sales declined by 16.6% from November 2008 when sales were $20.9 billion. (See chart below.)

“The global economic recession severely dampened semiconductor sales in the fourth quarter of 2008, historically a strong quarter for the industry,” said SIA President George Scalise (pictured) in a statement today. “Weakening demand for the major drivers of semiconductor sales -- including automotive products, personal computers, cell phones, and corporate information technology products -- resulted in a sharp drop in industry sales that affected nearly all product lines. Once again, the steepest revenue declines were in the memory sector where price pressure more than offset significant growth in total bit shipments.”

2008 marked the first year-on-year drop in sales since 2001, SIA's data showed. Total sales for 2008 were $248.6 billion compared to $255.6 billion in 2007, a decrease of 2.8%.

“As consumers worldwide drive over 50% of demand for semiconductors, the fortunes of the chip industry are increasingly linked to macroeconomic conditions such as GDP, consumer confidence, and disposable income,” Scalise said. “Sales of electronic products held up reasonably well during the first nine months of 2008, but fell sharply as turmoil in the global financial industry unfolded."

The decline in consumer spending indirectly hit the memory segments especially hard in 2008.

"The memory content of cell phones and PCs continued to increase dramatically driving large increases in total bit shipments," Scalise said. "Over the past 12 months, DRAM content of the typical PC grew by 44% to an average of 1.8 gigabytes, while the NAND content of a typical cell phone increased by 244%. However, severe price pressure resulted in significant declines in revenues for these product lines.”

Scalise, an active advisor to the United States government on the state of the tech industry and its role in the US economy, suggested a large part of the semiconductor industry's recovery will depend on federal measures.

“The industry is currently facing an unprecedented period of uncertainty," he said. "A resumption of sales growth will depend in part on the effectiveness of various measures now under consideration by the federal government to restore consumer confidence, improve liquidity, and stimulate economic growth.”