Two industry analyst firms issued revised semiconductor sales forecasts today that illustrate the poor economy’s effect on the semiconductor value chain, with one from Gartner shaving $25.5 billion off sales of chips in the coming year. That’s gonna sting, even when the revised total is still $282.2 billion in sales for 2009. The other was a report from IDC will lower its PC-chip shipment forecast for next year.
There are two factors at play, the most obvious being that sales of actual chip-containing gadgets are down as people put off purchasing new handsets, PCs or Blu-ray players. But people are also purchasing cheaper electronics that don’t have as high a silicon content. This means phones like the iPhone that contain 19 high-value semiconductors are replaced by phones containing fewer than 10 high-value chips.
These two trends will affect various suppliers unevenly depending on their product mix and size. For example, even though IDC lowered its forecast for 2009, the recently ended third quarter was one of the best for PC shipments, driven in part because of the success of Intel’s (s INTC) low-end Atom chipset for notebooks and netbooks.
Good news, but also indicative of the trend toward lower-end silicon and gadgets. Atom chips sell for less than a higher-performance Intel laptop chip such as the hyped Core i7 (formerly known as Nehalem) in the news today. However, Intel could be better insulated against a downturn because while Atom chips costs less than high-end — and even low-end — Celeron chips, the margins are better. This leaves Intel with a higher-margin low-end chipset going into the downturn.
Other chip vendors, such as Broadcom (s BRCM), Atheros (s ATHR) and Marvell (s MRVL) might fare better than other chip vendors because they make the kinds of chips needed to communicate with Wi-Fi, GPS, Bluetooth and FM/AM radio networks. As these features become more standards on existing devices that means their chips are built into more products. Add to this the fact that many of these vendors have built cheaper integrated chipsets for vendors, and sales shouldn’t fall too rapidly. The transition to next generation Wi-Fi should also help.
Firms such as Texas Instruments (s TXN), STMicroelectronics (s STM), Qualcomm (s QCOM) and Freescale (s FSL), which make chips for high-end cell phones and cellular base stations, might see losses caused by a decline in handset sales and a slowdown in capital expenditures on networks. TI and STMicro have already indicated that they are seeing declines in maay of their business segments. Qualcomm reports earnings on Thursday, and analysts are expecting it to see lower sales on softening handset demand.