SAN MATEO, Calif., February 24, 2009 – The sharp economic downturn which began in late 2007 is now affecting consumer and IT spending in a significant way. The semiconductor market, which was one of the first industries to be affected, remains in a state of turbulence. Semiconductors are an integral part of almost every electronic device and the broad base declines in units shipped resulting from deteriorating demand and expectations for continued weakness going forward has driven a lower outlook for the industry this year. Following a slight revenue decline of 2% in 2008, primarily due to a very weak fourth quarter, the worldwide semiconductor market will not recover until 2010. In fact, IDC expects a further revenue decline of 22% in 2009, due to double digit declines in unit shipments of key system markets, low utilization rates, and price erosion. This abrupt slowdown will not only affect the U.S. and Europe, but also Japan and Asia/Pacific regions.

IDC's Worldwide Semiconductor Applications Forecast, which covers over 55 of the largest device applications, reports that key device applications such as personal computers, consumer, and mobile phones are all experiencing a significant decline in units shipped. This, coupled with ample ASP erosion, is aiding in the –22% growth forecasted by IDC for this year.

"The semiconductor industry downturn will be prolonged by macroeconomic uncertainty this year," said Mario Morales, vice president for Semiconductor Research at IDC. "With demand visibility low, utilization rates at frozen levels, and supplier inventories growing because of deteriorating demand targets, IDC does not expect year-over-year growth for semiconductor revenues until the second quarter of 2010."

"The semiconductor market, which is tightly correlated to GDP, will not reach an inflection point until GDP rises and consumer spending rebounds," added Brianne Lovett, research manager for Worldwide Semiconductor Market Forecaster at IDC. "The semiconductor market will begin to stabilize at the end of 2009 and improve in 2010 with a positive growth rate. However, the market will not rise to the levels seen in 2007 and 2008, until beyond 2011."

Other key findings from the Worldwide Semiconductor Applications Forecast's market model are as follows:

• Macroeconomic factors will bottom at the end of 2009 and won’t recover until mid 2010. U.S. will lead the worldwide recovery.

• DRAM and NAND markets stabilize by 2H09, but revenue growth does not return until 2010.

• Dedicated foundry market remains unstable through 1H09, as utilization rates bottom by the middle of the year and then gradually recover.

• Capital spending declines by more than 45% in 2009.

• Despite the downturn in the market there are real opportunities for suppliers as the business models, devices, and services continue to evolve in consumer and mobile markets:

• Connectivity, wireless broadband, multicore processors, and NAND are the key technologies suppliers are investing in over the next couple of years.

• Suppliers with solid leadership and experience, and a healthy financial structure will be in the drivers seat when the market recovers.

IDC's Worldwide Semiconductor Applications Forecast market model provides analysis and market sizing for key device application markets that are consuming semiconductors. For more information, or to subscribe, please contact IDC's Sales hotline at 508-988-7988 or email sales@idc.com.

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