Semiconductor business has hit the bottom

There is light at the end of the tunnel for semiconductor manufacturers

The semiconductor industry has hit the bottom of the recession and sales are starting to rebound, according to the latest research data from Gartner.

Bob Johnson, vice president of research at Gartner, told delegates at Semicon West 2009 that the industry had bottomed out and will see overall growth in revenues until at least 2012.

"Guys, we've weathered another one," he said. "We think we've found the bottom. Things are starting to look better and that's even when we're taking a conservative view."

Johnson explained that the effects on the industry had been lessened significantly by much better inventory management compared to the last downturn in 2001. This saved the industry from large amounts of surplus product that can depress prices.

The analyst said that the industry had reacted too late to the slowdown in demand in 2001. Revenues had dropped 15 per cent in the fourth quarter of 2000, but inventory increased by 25 per cent.

By contrast, companies had almost slammed the brakes on orders too hard at the beginning of the current downturn, and are ordering again to cover basic inventory needs.

However, Johnson forecast stormy times ahead for memory manufacturers. A long hangover from the capital spending binge of the past four years, and another crash for the memory market expected in 2013, means that the industry may again allow spending to get out of control.

"Despite two bankruptcies in the industry we do not think they will learn the lesson until they've been through another down cycle," he warned.

However, Johnson said that, while there would be steady growth, industry revenues will not reach the same levels of spending before the downturn for the foreseeable future and certainly not before 2013.