Gartner analysts are warning that the semiconductor industry could plunge into a downturn in 2008 if the US economy falters.
The analysts warned clients in a report issued this week that the US faces a recession by early next year due to climbing oil and gas prices and a struggling housing market. That would leave less money for consumers to spend on personal computers, laptops, hand-held devices, and gaming consoles, which would sharply slow sales of semiconductors.
The report said that a downturn in the semiconductor industry could extend into 2009, and recommended that Gartner clients prepare backup plans to survive the likely recession.
"We're looking at a 30 per cent chance of the US going into a recession," said Dean Freeman, an analyst with Gartner. "Thirty per cent is a fairly good probability. If we go into a recession, then consumers will spend a lot less. And since a lot of what we spend on is electronics, we'll see less growth in the overall semiconductor industry next year."
He added that a recession would be likely to weaken other economies around the world, furthering the negative impact on the semiconductor industry.
Freeman said that Gartner calculated that without a recession, the worldwide semiconductor industry would see an eight per cent increase in revenue next year. If there is a recession, the outlook changes pretty significantly – a poor US economy could mean a three to seven per cent decline in 2008 revenue, he added.
The Gartner report also noted that an industry downturn would hurt semiconductor equipment companies more than chip companies.
Freeman did note that a downturn would likely mean more bad news for Advanced Micro Devices, which has taken several bumps lately. He pointed out that AMD is carrying significant debt and a downturn in the semiconductor market would mean less money coming in to pay off that debt.
While AMD reportedly is at least six months away from moving to a 45-nanometre chip, Intel released its 45nm Penryn chip family earlier this week. AMD also has to contend with an ongoing price war with Intel. While both are lowering prices, AMD seems to be getting hit by it the hardest these days.