SAN FRANCISCO - Global semiconductor sales will decline less than previously forecast this year and will return to growth in 2010, tech research house iSuppli said on Wednesday.

Worldwide chip sales are now forecast to decline 16.5 percent this year to $216.1 billion, compared with a previous forecast for a 23 percent drop, iSuppli said.

The semiconductor industry has been pummeled by a global recession that has drastically weakened corporate IT spending and hurt demand for everything from computers to cell phones.

But analysts point to signs of stabilization and a possible recovery. Semiconductor sales in the second quarter were strong compared with the first quarter, and there is improving supply chain visibility and demand, iSuppli said.

China's stimulus package boosted consumer spending in the second quarter, while the U.S. stimulus package has yet to have had a significant impact, it said. Third-quarter semiconductor sales are rising on improved market outlooks from manufacturers for computers and handsets, it added.

Semiconductor revenue is forecast to grow on a year-on-year basis beginning next May, and overall 2010 revenue is expected to rise 13.8 percent to $246 billion, it said.

If chip sales do not grow on a year-on-year basis until next May, that would mean 20 straight months without growth in semiconductor revenue, longer than the 17 months the industry went through during the last major downturn from 2001 to 2002.

Annual growth is not expected to return to pre-downturn levels until 2012, when revenue is expected to hit $282.7 billion, according to iSuppli. (Reporting by Clare Baldwin; editing by John Wallace)

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