It was already a sluggish period for ICs in the first half. Many market researchers lowered their IC forecasts, due to the sub-prime housing crisis, soaring oil prices and other factors.

Average selling prices (ASPs) for ICs continue to be a concern. Memory products are down. It's a mixed bag for chips in PCs, cell phones and other products.

But now, there is expected to be a dip in consumer spending in electronics, which will impact IC makers. ''As the economic cycle unfolds it seems inconceivable that we will not see a more significant reduction in spending on electronics, even in the most resilient of industry sectors and regional markets,'' said Richard Gordon, an analyst with Gartner Inc. ''Therefore, in coming months we expect to see signs of a widespread slowdown in the electronics sector, which would directly impact semiconductor sales.''

There are mixed signals in the IC sector. ''Semiconductor sales in June 2008 were slightly higher than our expectations, at $25.5 billion. Sales for the first six months of 2008 were 5 percent higher than in the same period last year, but the market is likely to be relatively soft in coming quarters," Gordon said in a report.

''We remain conservative in our forecast for semiconductor sales in 2H '08 and 1H '09,'' he added. ''Projected sales of about $140 billion for 2H '08 would represent growth of around 3 percent compared to the same period last year, and lead to annual sales of about $267 billion and an annual growth rate of about 4 percent for 2008 as a whole. We expect a relatively weak start to 2009 before a stronger second half of the year sets the market up for an annual growth rate in the mid to high single digits.''

Some see the light at the end of the tunnel. ''The percentage year-over-year change in chip unit growth rate is approaching negative growth, which has historically signaled a bottoming process,'' said Mehdi Hosseini, an analyst with Friedman Billings Ramsey & Co. Inc. (FBR).

There is ''no excess chip inventories are in the channel, helping with acceleration of unit growth when end-market demand picks up again,'' Hosseini added in a report.

AMAT: Hit and miss

But capital spending remains slow. ''Front-end bookings are down 46 percent from the peak, verses average peak-to-trough of 48 percent,'' he said. Back-end bookings from the peak to trough appear to have changed since they are down by 17 percent from the peak, verses average peak-to-trough of 55 percent. Back-end bookings are up 10 percent since January 2008, he said.

All eyes will be on fab-tool giant Applied Materials Inc., which will report its results on Aug. 12. ''We expect an in-line quarter, with booking declining 25 percent quarter-over-quarter, at the low end of the guidance range of minus 15 percent to 25 percent,'' the FBR analyst said. ''We also expect downside risk to the October-quarter consensus estimates, though we do not expect Applied to include any solar revenue in the guidance, given uncertainties associated with the timing of qualifications.''

There are mixed reviews of Applied's solar business, which is booming amid growing demand. Applied sells a turnkey solution for solar fabs as well as solar gear.

''Although competitors continue to make noise about the 'imperfection' of Applied's solar technology, we believe Applied's continues to hit its milestones, though there have been several quarters of delays along the way,'' he said. ''Thus, we still see a tremendous market opportunity in solar, as Applied is among a few that are working on a technology that could make the total cost of module deployment/energy generation at or below grid prices by calendar 2010, theoretically before even industry cost leaders such as First Solar.''

Others have a different view about Applied. ''Heading into Applied's July report on August 12, we expect revenue to be slightly above consensus given lowered expectations,'' said Edwin Mok, an analyst with Needham & Co. LLC.

''Overall, we believe the report will be slightly positive for the stock due to better-than-expected F4Q silicon bookings, strong display business and good F3Q solar bookings,'' Mok said in a report. ''However, we believe those positives will be offset by weaker F4Q guidance on sequentially lower silicon and service revenues and weaker margins.''

Mok is modeling revenue/EPS estimates of $1.87 billion and $0.14 per share, verses a consensus of $1.84 billion and $0.14.