Chip slump steadying, but optimism “premature”

April 6, 2009 – In times like this, what counts as good news in the industry is that the bad news isn’t getting any worse.

While sales keep sliding, the rate of decline vs. the prior month seems to be slowing, though perhaps too soon to take hope from it as a trend. Declines in February vs. January improved across the Americas (-3.7% vs. -5.3%), Europe (-6.9% vs. -10.8%) — and particularly the Asia-Pacific (-6.5% vs. -13.7%), where the lion’s share of chip manufacturing is located. Vs. the year-ago month, sales declines were basically flat vs. Jan ’09/Jan’08 (~-25% to -30%), though worsened slightly for Japan (now ~-36%). Tracking the moving three-month average, sales declines still look awful (~-30%), but also didn’t get any worse than the previous period.

While acknowledging that the declines in chip sales seem to be slowing since 4Q08, SIA president George Scalise stopped short of saying the worst is over, admitting that “it would be premature to conclude that the sales decline has hit bottom.” The industry’s quick response to sagging demand with production cutbacks and inventory reduction efforts bode well, he noted, pointing to “slight improvements” seen in utilization rates at TSMC and UMC. Still, Scalise predicts that chip demand “is likely to continue well below 2008 levels for the next few quarters,” with recovery gradually following with a rebound in the global economy,” Scalise stated.


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