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Gartner predicts electronics sector slowdown

Chip industry won't recover until late next year

A weakening global economy will soon cause consumers worldwide to slow spending on electronics products, a Gartner analyst warned today.

"In coming months we expect to see signs of a widespread slowdown in the electronics sector, which would directly impact semiconductor sales," said Richard Gordon, analyst at Gartner, in the market researcher's Semiconductor Monday DQ Report. The chip industry likely won't start to recover until the second half of next year.

The impact of the credit crunch on the US, and to some degree European, housing markets, along with high energy prices directly hurting consumers, will lead to slower spending on electronics gear, he said.

Sales of PCs and smartphones have held up well so far to this year due largely to demand in emerging markets such as China, India, Russia and South America, which have also boosted semiconductor sales. Chips are the main building blocks of all electronic devices, and more chips go into computers and handsets than any other products.

The Gartner analyst said emerging market nations will eventually feel the impact of the worsening global economy.

"As the economic cycle unfolds it seems inconceivable that we will not see a more significant reduction in spending on electronics, even in the most resilient of industry sectors and regional markets," he said.

In March Gartner lowered its 2008 global semiconductor forecast, citing falling memory chip prices and the weakening global economy.
The market researcher's prediction dropped to 3.4 percent chip revenue growth this year to $278.4bn, compared to a previous estimate of 6.2 percent. Last year, chip revenue reached $269.4bn, up 2.5 percent year-over-year.

Just a week later, Gartner warned of rising chip inventories, an issue that has not gone away.

More recently, several global memory chip makers reported hefty losses during their second quarter investors' conferences, and saw little upside to the current quarter.

Taiwan Semiconductor Manufacturing (TSMC) CEO Rick Tsai also warned that the company expects its business to turn weaker as the third quarter nears an end, blaming slow growth in the US and weaker growth in China as well.

TSMC, the world's largest contract chip maker, is considered a bellwether for the global technology industry because it produces chips for such a wide range of products, including digital cameras, music players, mobile phones and PCs.

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