Chip sales fell in 2008; look out below in 2009

Worldwide sales of semiconductors fell dramatically in December, traditionally a strong month that usually caps the best quarter of the year for the industry, the Semiconductor Industry Association (SIA) reported today.

As a result of the December decline (down 22% from the same month in 2007), the SIA adjusted its final sales figure for 2008 to show a 2.8% fall from the prior year, to $248.6 billion from 2007′s $255.6 billion.

If that 2008 figure holds up on final analysis, that means the semiconductor industry failed to grow sales for the first time since 2001, when the industry began a prolonged downturn that went on until 2003, due to the dot-com/telecom bust.

Just a few months ago, the SIA forecast worldwide sales would reach $261.2 billion in 2008, a 2.2% gain over 2007. That was before the December numbers came in. The association previously forecast that 2009 sales would be $246.7 billion. That number may now be on the optimistic upside of industry forecasts.

The SIA blamed weakening demand for chips going into automotive products, cell phones, corporate IT products, and PCs for the disastrous December figures. Many chip makers, such as Freescale Semiconductor, are considering bigger job cuts for 2009 than previously disclosed, while Intel and Texas Instruments already are dismissing thousands of workers.

“This is the way the world ends,” wrote T. S. Eliot in The Hollow Men. “Not with a bang but a whimper.”