The Semiconductor Industry Association (SIA),one of many industry watchers that has backtracked on previously optimistic outlooks for the year's performance, dramatically downgraded its forecast for 2007 global microchip sales growth yesterday from its 10 percent estimate made in February to a 1.8 percent.

Due, the SIA said, to declines in average selling prices (ASP) for microchips in several key market segments, the new forecast projects total sales of $252 billion in 2007, rising to $306 billion in 2010.

In May, market research firm Gartner Inc. slashed its outlook for industry growth from 6.4 percent to 2.5 percent, while the World Semiconductor Trade Statistics (WSTS) group forecast just 2.3 percent growth for the global semiconductor market, down from the projection of 8.6 percent growth the group issued last autumn. In April, iSuppli forecasted that global semiconductor revenue will rise to $281.4 billion in 2007, up 8.1 percent from $260.2 billion in 2006; the firm had previously predicted 10.6 percent growth for the year. And IC Insights lowered its expectations for full-year 2007 worldwide IC market growth 5 percentage points, from 7 percent to 2 percent.

For its part, the SIA said that its dramatic downgrade for the year's outlook was due more to lower prices than to lower end market sales. "Despite strong unit demand for semiconductors, driven by healthy growth in major end markets, worldwide microchip sales will not reach our earlier forecast of 10 percent growth in 2007," SIA President George Scalise said today in a statement. "The new forecast projects a 5.4 percent compound annual growth rate for year end 2006 through 2010. Rapid price attrition in three key market segments ¨C microprocessors, DRAMs and NAND flash memories ¨C is the major factor contributing to lower growth than previously projected."

The SIA noted that end markets that drive sales of these products ¨C personal computers, cell phones, MP3/PMP devices, and other consumer products such as digital TVs and digital cameras ¨C continue to be in line with previous forecasts. "PC sales are on track to reach 10 percent unit growth in 2007, reaching approximately 255 million units," Scalise continued. "PCs continue to be the largest single end market for semiconductors. Despite strong unit PC sales growth, we expect that total sales of microprocessors will decline by 1.6 percent as intense competition is contributing to price erosion at a more rapid pace than historical patterns.¡±

Scalise went on to note that DRAMs continue to be under significant price pressure and said the SIA now expects total sales to grow by 2 percent in 2007. "Inventory issues in this segment will affect ASPs going forward, and the current forecast assumes continued degradation of prices," Scalise said.

In addition, the SIA said that growth in the handset market has slowed somewhat, with unit growth of around 10 percent currently projected for 2007 ¡ª which translates to an additional 100 million units in 2007.

Further, the SIA said that other consumer products continue to experience very strong unit growth. "Sales of personal media players (PMP) and MP3 players are expected to grow by more than 20 percent this year to more than 215 million units, driving unit demand for flash memory," Scalise said.  However, higher unit sales in this case do not necessitate a benefited bottom line. "Despite strong unit growth in important demand drivers for NAND flash, this market segment is experiencing price attrition in a very competitive environment.¡±

Meanwhile, other market segments ¨C discrete products, optoelectronic devices, sensors, analog chips and MOS micro ¨C will see growth in line with the overall industry forecast, the SIA said, while MOS logic devices are expected to grow by 5.7 percent in 2007.

On the whole, it is a grim forecast compared with the SIA's previously high hopes for the year. But Scalise noted that it could be worse ¡ª 1.8 percent growth is still better than no growth. "Despite a forecast of slower growth, we expect that global sales of microchips will surpass last year's record level," Scalise concluded.

By: DocMemory
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