Oct. 10, 2008 – The ugly economic condition still unfolding daily and globally is behind yet another chip industry downgrade, this time by iSuppli Corp. The firm now sees a 3.5% increase in chip sales this year to $280.1B, slightly below the 4% growth it predicted just two months ago.

Semiconductor sales stats from the SIA had been tracking generally along with iSuppli’s expectations, but signs have started to appear over recent weeks that the sector is feeling the pressure from the economic meltdowns unfolding.

“The credit crisis is impacting the semiconductor market on several levels,” said Dale Ford, senior vice president, market intelligence, for iSuppli, in a statement. Wall Street firms’ electronic equipment purchasing will suffer directly, of course, but the more significant impact will be to companies who can’t get credit, which will spread the problem through the wider economy, impacting general demand for devices and semiconductors. “The final level, and the most significant area of impact, is the broader effect on consumer confidence and spending if the overall economy collapses,” he states.

The firm’s memory outlook is particularly bleak, lowered by 5.8 percentage points (5.4 points for DRAM alone). Memory makes up nearly 10% of global semiconductor sales, so this is a “major drag” on the industry now. The firm just recently cut its near-term outlook on the DRAM sector to “Negative, citing a “long-suffering” inventory glut.

However, iSuppli did upgrade its 2008 forecast for global ASSP semiconductors by 3.2 percentage points; these devices are key in all types of equipment from mobile handsets to hard-disk drive controllers.

And the firm remains “cautiously optimistic” about PC demand through year’s end, anticipating 12.5% growth in shipments — though here, too, it notes it’s seen some weakening demand since the start of September.

Global semiconductor industry revenue forecast, 2008-2012. (Source: iSuppli)