While revenue began growing on a sequential basis in Q2, encouraging some market watchers to better their 2009 forecasts and some industry players to upgrade their Q3 guidances, sales will not begin to increase on a year-to-year basis until May 2010, iSuppli estimates.

Estimates for the 2009 semiconductor industry market continue to improve, but are far from bright at this point.

ISuppli this week followed IC Insights and Gartner to become the latest market research company to upgrade its forecast for the year's chip sales, now predicting global sales will fall 16.5% year over year. The revised outlook report compares to estimates iSuppli had previously released calling for a 23% decline.

“Lack of visibility from the end market and through the electronics supply chain was a major problem for semiconductor suppliers in the first quarter,” said Dale Ford, senior VP of market intelligence services for iSuppli, in a statement. “However, due to a stabilizing economic environment in the second quarter and improving supply chain visibility, semiconductor shipments rebounded as inventories were replenished and modest forward-looking purchases were made.”

ISuppli noted that Q3 semiconductor sales are benefiting from improved market outlooks by major OEMs in key markets such as PCs and mobile handsets. Indeed, in recent weeks, Intel, Texas Instruments, Rambus, and Xilinx all improved their September quarter outlooks, noting more stable economic and inventory environments, as well as increased demand. ISuppli also noted that the global economy in Q2 was boosted by worldwide economic stimulus efforts.
 
Even with the Q2 gains and bettered outlooks, the industry remains cautious as it is in what iSuppli described as "uncharted territories."

“In the history of the semiconductor industry, the market has never had a cycle like this one,” Ford said. “Semiconductor sales have always been subject to a cyclical growth pattern that sees a move from a low point, through one or more supply-chain balancing periods and then to an eventual peak in revenue. However, the most recent cycle, starting in February 2006, was robbed of its peak. Just as the industry had achieved a balanced supply chain and was starting to move toward a peak, the global economic crisis drove the industry down.”

While revenue began growing on a sequential basis in Q2, sales will not begin to increase on a year-to-year basis until May 2010, the company estimated. The forecast offers a telling measure of just how long this downturn will be. According to iSuppli's data, the industry will suffer through 20 months without year-over-year revenue growth, compared to the 17-month downturn that the industry experienced during the 2001-2002 decline.

When growth does return in 2010, it will bring a 13.8% year-on-year sales rise, according to iSuppli. However, even with the expected 2010 growth the market won’t return to its 2007, pre-downturn level until 2012. Global semiconductor revenue will rise to $282.7 billion in 2012, compared to $273.4 billion in 2007, iSuppli estimated.
 
ISuppli forecasted that global revenue from shipments of electronic equipment will decline by 9% in 2009 to $1.39 trillion, down from $1.53 trillion in 2008. Growth will rebound by 5.2% in 2010 to reach $1.47 trillion.