Semiconductor revenues in decline

5 Jun 2007

Gartner has lowered its 2007 worldwide semiconductor revenue forecast to US$269.2bn – only a 2.5pc increase on the previous year – due to sever declines in DRAM prices and continued price competition.

Analysts at the research firm said semiconductor sales in the first quarter of 2007 were more than 5pc lower than in the fourth quarter of 2006, which was worse than the expected decline normally associated with the seasonal build-up in inventory levels at year’s end.

“Since the beginning of this year soft semiconductor market conditions have been exacerbated by sharply declining average selling prices (ASP) in key device markets such as DRAM, MPU and application-specific standard products (ASSPs),” said Richard Gordon, research vice-president at Gartner.

“It is likely that, despite continued unit growth in influential electronic systems markets, downward device ASP pressure will remain in place for much of 2007 as oversupplied semiconductor market conditions persist.”

The worldwide memory market is forecast to decline 4.7pc in 2007 due to continued weakening of DRAM average selling prices.

Gartner forecasts DRAM revenue declining 11.1pc in 2007 to US$30.5bn. The outlook for DRAMs in 2008 is for a mild revenue decline attributed to excess capacity and continued price declines.

However, the outlook for 2008 could improve if DRAM vendors adjust their current capacity plans or if the NAND flash memory industry sees strong growth through demand for portable video players.

In terms of inventory, Gartner’s analysis of companies involved throughout the supply chain suggests that the increase in overall semiconductor inventory levels observed over the past few quarters may have peaked in the first quarter of 2007 with a trend reversal expected in coming quarters.

“There are still individual sectors where ‘inventory days’ continued to rise but in most sectors inventories have levelled 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 said it expects the worldwide semiconductor industry to return to modest annual growth of 8.7pc and 7.2pc in 2008 and 2009, respectively.

By John Kennedy