Semiconductor Sales Declined in 2008; Negligible Improvement Expected in 2009 

Emblematic of the strong pricing pressures experienced by the industry, average selling prices (ASPs) for both DRAM and NAND flash declined precipitously throughout the year. NAND flash revenues were down 15.4% but unit shipments shot up 28.0%, translating into an ASP decline of almost 40.0%. Total bit shipments for DRAM increased 9.2% in 2008, but total revenues fell 23.2% because of an almost 30.0% drop in ASPs. IHS Global Insight's DRAM spot price index fell nearly 54% during the course of the year.

Likewise, capital spending on semiconductor manufacturing equipment continues to abate, a trend that has lasted a full 24 months. After several very robust years, the North America book-to-bill ratio has spent a prolonged period below 1.00, starting with February 2007 at 0.98 and then on through January 2009 at 0.48. As a result, bookings are at their lowest levels since 1991. Nevertheless, capital spending is unlikely to snap back in 2009; utilization rates are expected to be in the 40–60% range through the first half of the year before picking up again in the last six months of 2009 and continuing into 2010. Strong investment in semiconductor manufacturing equipment persisted for several years, but substantial previous equipment purchases, weak prices, and soft utilization rates provide little incentive to invest now.

IHS Global Insight forecasts 2009 to be a year of stagnation at best; much depends on the health of the overall economy. As consumers worldwide drive over 50% of semiconductor demand, the fortunes of the chip industry are increasingly linked to macroeconomic conditions such as GDP, consumer confidence, and disposable income. At worst, nominal sales could experience significant declines if the current recession deepens and broadens more than is currently expected. Looking beyond the current year, 2010 holds some promise for a resurgence as business investment and personal consumption become reinvigorated.