The iPhone is the latest craze, but a question looms for chip makers: Can it save the IC industry from plummeting into a potential downturn in 2007?
While Apple Computer Inc.'s iPhone has the potential to jump-start parts of the slumping chip industry this year, it's still a stretch to describe the souped-up cellular phone as a "killer application"--or even a major IC growth driver.
The iPhone may not even measure up to its cousin, the iPod. Despite the impressive rollout of the iPhone, Semico Research Corp. (Phoenix) has reduced its chip forecast into negative territory for 2007, declaring the IC industry is now engulfed in the dreaded "D" word: downturn. Semico has already factored in the iPhone to its IC forecast, which stands at –0.5 percent growth for 2007.
To be sure, the iPhone has caused a slight stir--and some buying speculation--in the spot market for NAND flash. Overall, however, only a select group of component suppliers with iPhone design wins will benefit from the emerging but tiny sector.
iPhone will claim a fraction of 2008 global handset shipments.
Apple is projected to ship about 4 million iPhones in 2007, according to the DRAMeXchange. In 2008, Apple is expected to ship about 12 million iPhones--or only about 1 percent of worldwide handset shipments--according to the memory clearing house.
"Apple's iPhone will create new demand for media-focused devices, but it won't fulfill it all, because of a relatively high price," said analysts Alfonso Velosa and Jon Erensen of Gartner Inc. (Stamford, Conn.), in a report. "Instead, by the end of 2009, there will be mass-market opportunities for OEMs with the right partners to offer similar products for less."
For that reason and others, Jim Feldhan, president of Semico, said the iPhone is not expected to reverse the deteriorating fundamentals in the overall IC industry in the short term.
The iPhone rollout "is too late to save the year," Feldhan said. Semico has reduced its semiconductor forecast from positive 1.8 percent to minus 0.5 percent in 2007. Semico's internal indicators suggest that its bearish IC forecast could fall to somewhere between minus 3.5 percent and minus 5 percent in the near future. Any figure in negative territory constitutes a downturn.
Even before the recent launch of the iPhone, the overall semiconductor market has been plagued by poor fundamentals, including a DRAM downturn, bloated inventories, a capacity glut and falling average selling prices (ASPs) for ICs, he said.
Worldwide IC unit sales are projected to grow by 4 percent in 2007, down from Semico's previous forecast of 6 percent. The firm also lowered its capital spending forecast from minus 4 percent to minus 8 percent.