Chip sales record biggest drop in 19 years

The semiconductor industry last year suffered its worst annual slump in almost two decades, hurt by a trade war between the largest chip producer, the U.S., and the largest consumer, China.

Revenue fell 12% to $412 billion in 2019, the Semiconductor Industry Association said Monday in a statement. That’s the biggest drop since 2001, when industry sales slumped 32% as the dot-com bubble burst.

The rate of decline last year abated with sales growing slightly in the fourth quarter from the preceding three-month period, the industry association said. For that to continue, China and the U.S. need to build on the phase one trade agreement announced last month.

“Policies that promote free trade and ensure open access to global markets are needed for continued recovery in the coming months,” John Neuffer, SIA president, said in a statement.

The decline in industry sales didn’t stop investors betting on a future rebound. In 2019, five of the top 10 performers on the S&P 500 Index were chipmakers or chip-equipment companies. Advanced Micro Devices Inc. was the overall top performer surging 148% for the year.

Memory chips were the hardest hit. Prices of those commodity chips fell as production outran demand. Memory revenue dropped 33% from 2018 led by declines in computer memory.

All regions experienced a decline in demand. Sales in China, whose consumers and factories that supply finished products to the rest of the world account for more than one-third of global consumption of the electronic components, fell 8.7%, according to the SIA.

Sales in the Americas dropped the most of any region at 24%.

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Chip sales record biggest drop in 19 years