Downgraded chip industry may signal tech transition

Hardware struggles as chips and PCs continue slide

By , Computerworld |  Hardware

The worldwide chip market dropped from being labeled "stagnant" to "in a slump" this year, with one analyst firm downgrading its forecast to a level that puts the entire year in a decline.

IHS iSuppli announced Monday that it is downgrading its forecast for the global semiconductor market this year. The analyst firm now expects worldwide chip sales to decline 2.3% in 2012, from $310 billion in 2011 to $303 billion this year.

This isn't the first time this year that IHS has lowered its semiconductor market forecast.

However, the latest revision does show a steeper drop than previous updates. In August, iSuppli predicted 0.1% decline, then in September it changed its forecast to call for a 1.7% decline.

If the firm is correct, this would be the first annual decline for the global chip industry since 2009.

Zeus Kerravala, an analyst at ZK Research, said the report shows a shift in the tech industry.

"Tech is in transition away from hardware to more of a focus on software and virtual services," Kerravala said. "We're still buying apps, games, movies and music, but we need to refresh our hardware less often. Tech will be fine, as there will be investments in cloud, mobile applications and virtualization, but the hardware segment will be flat."

While Kerravala said software and services companies like Oracle and Amazon will do well, hardware companies like Hewlett-Packard and Dell will be affected by the transition, and it could be a bumpy ride.

With the semiconductor market playing a pivotal role in hardware from servers to laptops, tablets and smartphones, a drop in chip sales means widespread trouble in computer hardware industry.

Originally published on Computerworld |  Click here to read the original story.
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