iSuppli upgrades semicon forecast for 2006

Improving conditions in the memory market have cast a more positive light on the semiconductor industry's outlook for 2006, prompting iSuppli Corp. to upgrade its chip revenue forecast mildly for this year.

The market research firm predicts worldwide semiconductor revenue will grow to $254.7 billion in 2006, up 7.4 percent from $237.1 billion in 2005. Its previous forecast, issued in January, predicted a 6.8 percent increase in global semiconductor revenue in 2006.

The major factor behind iSuppli's upgrade is the improving condition of the DRAM market, which will account for more than 10 percent of worldwide semiconductor revenue in 2006. In contrast to 2005, when DRAM revenue contracted by 6.2 percent, sales in this area will rise by a corresponding 6.2 percent in 2006, growing to $26.4 billion, up from $24.8 billion in 2005.

With growth of 3.6 percent in 2005, and 7.4 percent in 2006, the market is experiencing a "double bottom," where growth for two years will lag the overall semiconductor compound annual growth rate from 2005 to 2010, according to Gary Grandbois, principal analyst for iSuppli.

"It had been debated for some time whether 2005 or 2006 would be the bottom year in the downside of the silicon cycle; in fact, it appears that both 2005 and 2006 will represent an extended two-year period of moderate growth before the market returns to double-digit growth in 2007," Grandbois added.

iSuppli also forecasts worldwide semiconductor revenue will rise to $285.2 billion in 2007, up nearly 12 percent from 2006.