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Gartner slashes chip industry outlook

Posted: 04 Jun 2007 ?? ?Print Version ?Bookmark and Share

Keywords:chip market growth? Gartner forecast? DRAM prices?

Gartner Inc. has lowered its global sales outlook for the semiconductor industry for 2007, citing the continuing fall in DRAM and microprocessor prices.

The IT research firm said in its "Semiconductor Market Forecast Alert: 2Q07 Update" report that the market is expected to grow to $269.2 billion for the full year. This translates to just a 2.5- percent revenue increase from 2006, a severe downward revision from Gartner's previous forecast of 6.4 percent.

"Since the beginning of this year, soft semiconductor market conditions have been exacerbated by sharply declining ASPs [average selling prices] in key device markets such as DRAM, MPU and [ASSPs]," said Richard Gordon, research VP at Gartner.

Semiconductor sales in the January-March period were more than five percent lower than in the last quarter of 2006, which was worse than the expected decline given the seasonal excess inventory at yearend.

The persistence of the oversupply problem has Gartner analysts predicting an 11.1-percent decline in DRAM revenue for 2007, and a 4.7 percent downturn for the memory market overall.

Gordon said the unit growth of the electronic systems markets remains on track, but the trend will not likely influence the chip industry into overcoming ASP pressure for the rest of the year. The forecast report indicated hope for a better 2008 outlook, given that DRAM vendors adjust their current capacity plans, or if demand in the NAND flash memory sector sees a comeback.

The microcomponent market, meanwhile, received a flat forecast for the full year as it continues to be dogged by cutthroat pricing rivalry between the leading vendors.

The slow uptake of inventory leveling in the first half saw marginal downward revisions for general-purpose analog IC market growth and discretes market growth to 6.3 percent and 4.3 percent, respectively.

"There are still individual sectors where 'inventory days' continued to rise, but in most sectors inventories have leveled or are already beginning to decline," Gordon said. "This correction is happening sooner than we expected and will have the effect of reducing annual growth prospects in 2007, but it is another indication that semiconductor manufacturers are continuing to aggressively manage output to control inventory levels."

Gartner expects the worldwide semiconductor industry to return to modest annual growth of 8.7 percent and 7.2 percent in 2008 and 2009, respectively.

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