Global economic woes eroding IT spending: Analysts

SAN FRANCISCO (AP) : Industry trackers on Wednesday slashed projections of global spending on information technology (IT) and said computer chip makers  could be hit with an unprecedented plunge in revenue.

IDC predicts worldwide IT spending will rise a meager half percent in 2009 because of economic turmoil and says that if exchange rate trends continue US technology exporters will take financial beatings.

“The sharp economic downturn which began in 2007 is now affecting consumer and IT spending in a significant way,” IDC said in a release.

“The semiconductor market, which was one of the first industries to be affected, remains in a state of turbulence.”

Gartner technology research firm on Wednesday painted a bleak picture, saying it expects worldwide semiconductor revenue to drop 24.1 percent this year to 194.5 billion dollars (US).

“We believe that the financial crisis has reset the semiconductor market,” said Gartner research vice president Bryan Lewis.

Broad declines in shipments of semiconductors that are integral parts of nearly all electronic devices signal that manufacturers will be pumping out fewer gadgets for the market, according to IDC.

IDC forecasts that the semiconductor market will erode 22 percent this year after sliding two percent in 2008. The “abrupt slowdown” in chip shipments is likely to affect Asia, Europe and the United States, according to IDC.

Gartner expects worldwide semiconductor revenue to fall by at least 17 percent in the first three months of 2009, with a “strong possibility” of even lousier performance in that quarter.

Gartner analysts warn that the situation might continue to worsen through the year and the industry could be pounded by a record-breaking revenue drop of 33 percent in 2009.

“Semiconductor suppliers should prepare for Gartner’s negative scenario of a 33 percent decline in 2009 revenue,” Lewis said.

“Tight control of expenses is essential, but suppliers should reconsider dropping their overall research and development budgets because focused R&D investments in the recession will help determine the winners in the upturn.”

Gartner advises companies to use outsourcing and partnerships to extend R&D budgets.

Makers of DRAM computer memory lost more than 13 billion dollars in 2007 and 2008, leaving some facing bankruptcy and others cutting back on production, acording to analysts.

Reductions in supplies of that kind of memory are expected to drive up prices later this year, which would increase costs of making many electronic gadgets.

IDC and Gartner don’t expect the worldwide semiconductor market to recover until 2010.