Dec. 16--Reflecting plummeting worldwide sales of computers and other tech gadgets, global chip sales will be down this year -- and even worse next year -- a research group said Tuesday, representing the industry's first back-to-back decline in annual revenue since the firm began tracking the market in 1980.

"The bad news just keeps getting worse," according to the report by Connecticut-based Gartner.

The plunge in computer chip revenue not only signals a slowdown in sales of everything from iPods to multimillion-dollar servers, it also is particularly troubling for Silicon Valley. One-fifth of the revenue generated by the 150 biggest local companies tracked by the Mercury News comes from companies that make computer chips or the equipment used to manufacture them.

In recent weeks, a number of those companies have had to lower their earnings estimates for the near future because of deteriorating chip sales. Some -- including Novellus Systems, Applied Materials, National Semiconductor and Atmel -- have announced they are trimming their workforces.

Based on data from semiconductor companies and other sources, Gartner estimates global chip revenue will be $262 billion this year -- a 4.4 percent decline from 2007 -- and just $219 billion in 2009 -- a year-over-year drop of 16.3 percent.

That's quite a change from November, when Gartner predicted worldwide chip revenue in 2008 would be $275 billion, about

the same as last year, and down 2.2 percent in 2009.

Gartner isn't the only pessimist. Chip research firm ISuppli expects 2008 global chip sales to be 4 percent to 5 percent lower than last year, and next year's sales to be off by even more.

The fourth quarter so far has been especially dismal. Gartner expects chip sales for the three months to be off 24.4 percent from the same period last year, the biggest drop since chip sales declined 20 percent during the second quarter of the 2001 dot-com bust.

'Going to get worse'

"As bad as it is this quarter, it's going to get worse next year," said Amy Leong, Gartner's semiconductor research director, noting that chip sales in the first part of the year traditionally slow down as consumer purchases trail off from the holidays. "It's like falling off the cliff," she added, noting that new orders for chips "are just not coming in."

Gartner's report, which predicted that chip sales wouldn't rebound until 2010, said it expects personal computer sales to drop 5 percent in 2009 compared to 2008, and cell phone sales to be off 10 percent.