Future Horizons, Europe's leading semiconductor analyst company, reckons that 2009 will see a two per cent contraction in market size, but no re-run of the disastrous downturn of 2001.

"September marked the start of the 11th chip industry slowdown", says Future Horizons, "we now expect Q408 to be down 6 per cent on Q308, making 2008's growth just 2.2 per cent on 2007 - the fourth consecutive year of single digit market value growth."

The sole cause of downturns is over-supply, says Future Horizons, caused by a slump in demand, over-building of factories or excessive build-up of inventories. In 2001, all three happened.

"The 2001 slowdown was unique in that it was triggered by both demand and supply-side issues simultaneously, namely the collapse of the dot-com inflated demand euphoria, a 9-11 driven economic slowdown, and a massive inventory burn just as a huge amount of excess capacity was coming on stream. Everything that could have gone wrong did go wrong", says Future Horizons.

2009 will be different. There is no serious overcapacity with pre-slowdown utilisation rates in the 90s of per cent, and capex cut-backs implemented 12-18 months before the slowdown. There is little sign of inflated demand, with IC units running at or below the 10 per cent per year long-term trend line and no serious excess inventory in the supply chain.

So 2009 will see a two per cent contraction but, says Future Horizons: "The 2010-11 rebound could be much stronger than most people currently feel."

See also: Credit Crunch: Semiconductor light amid economic gloom, in which Electronics Weekly highlights some recent stories that run counter to the prevailing industrial outlook.

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