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iSuppli: IC industry growth forecast slashed to 3.5%

Posted: 28 Sep 2007     Print Version  Bookmark and Share

Keywords:global semiconductor industry  revenue growth  memory revenue 

Revenues of the global semiconductor industry will increase by only 3.5 per cent, not 6 per cent, as forecast by iSuppli Corp. in June of this year. This translates to an expected increase to Rs.1,091,699.35 crore ($269.9 billion) in 2007, up from Rs.1,054,082.44 crore ($260.6 billion) in 2006.

Slow 1H
Weakness in sales in the first half of the year will not be offset by the current uptick in growth, the company said. Global semiconductor revenue declined by six percent in the first half of 2007 compared to the second half of 2006, limiting market growth potential for the year.

"The major cause of the first-half semiconductor industry weakness was a 13 per cent sequential decline in revenue during the period for memory, led by DRAM and NAND-type flash," said Gary Grandbois, principal analyst with iSuppli. "The memory revenue decline was spurred by a drop in average selling prices, caused by a glut of parts on the market," he added.

Ironically, the downward revision comes at a time when chip revenue is up, the memory industry is improving and the outlook for electronic equipment markets is on the rise, according to iSuppli. The revival of growth springs not only from the normal year-end seasonal strength, but also from a surge in memory prices and revenue and a stronger end-equipment market. Global semiconductor revenue will rise by 10 per cent in the second half compared to the first, marking a major turnaround in market conditions, iSuppli said. It forecasts that semiconductor revenue will rise by 9.8 per cent sequentially in Q3 and by 4 per cent in Q4. The market watcher predicts the expansion will continue through 2008.

Memory chips growth
The total semiconductor market is expected to achieve a 9.3 per cent revenue expansion next year, iSuppli said. Memory revenue will rise by 15 per cent in the second half compared to the first as price erosion is blunted and the holiday season commences, bringing stronger sales of PCs, said the market watcher. Memory chips are expected to account for 23 per cent of total semiconductor revenue in 2007. The memory price decline earlier this year was due to oversupply.

DRAM vendors increased manufacturing at a rapid rate in the first half, driving a 94 per cent rise in bit shipments in 2007. That compares to the industry average of 55-60 per cent annual growth. In Q3, DRAM suppliers began slowing production growth. After declining by 10 per cent and 23.8 per cent sequentially in Q1 and Q2 of 2007 respectively, DRAM revenue will rise 20.8 per cent in the Q3 and will remain flat with a marginal 0.2 per cent decline in Q4, iSuppli predicted. Similarly, prices for NAND are expected to increase in Q3, following a 40 per cent decline in per-megabyte prices in Q1.

While the 2007 semiconductor forecast has declined, the outlook for shipments of electronic equipment has improved. iSuppli has raised its forecast for electronic equipment revenue growth in 2007 to 6.8 per cent, up from 6 per cent previously. Of the six major electronic equipment segments, five of them —data processing, wireless communications, wired communications, consumer electronics and automotive —have been upgraded by iSuppli. The company now expects electronic equipment revenue to rise by another seven per cent in 2008, up from the previous forecast of 6.4 per cent.

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