SUNNYVALE, Calif.Market research firm IC Insights Inc. has cut its semiconductor industry revenue forecast for 2008 by $6 billion, but said long-term trends would support pricing stabilization that will enable the industry to achieve a compound annual growth rate (CAGR) of 10.6 percent between 2007 and 2012.
IC Insights (Scottsdale, Ariz.) now forecasts that the industry will grow 4 percent in 2008, reaching $244.3 billion. Three months ago the firm predicted that the industry would grow 7 percent this year to $250.3 billion.
Bill McClean, president of IC Insights, attributed the revision to two chip segmentsthe logic market, which he said is experiencing an inventory correction, and the NAND flash market, where pricing has collapsed.
Overall, IC unit growth remains strong and is on track to increase 8 percent this year, McClean said, though average selling prices (ASPs) will be down 4 percent. "The market forecast revision is not about units," he said during an IC Insights seminar here. "It's based on pricing."
In the long term, though, McClean said new trends favoring reduced capital spending will serve to increase fab utilization rates, ultimately stabilizing chips ASPs or even causing them to increase. Overall chip ASPs decreased 5 percent in 2007 and 8 percent in 2006, according to IC Insights.
As a result of less aggressive expansion by major chip vendors in 2008, McClean said, overall semiconductor industry capital spending will be down 18 percent this year.
Capital spending as a percentage of semiconductor sales will be about 17.5 percent, he said, the lowest since 2003. Over the past four years it has been in the 20 to 22 percent range, and historically has been 20 to 30 percent most years since 1995, according to data provided by IC Insights.
"In our opinion, this [capital spending as a percentage of sales] number is not coming back up," McClean said. The percentage will move toward 15 percent in the long term, he said.
The reduction in capital spending has evolved thanks to a change in mentality among chip vendors, McClean said, with a new focus on profitability. The change in philosophy is being led by silicon foundry giants Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) and United Microelectronics Corp. (UMC), who are scaling back on capital spending in an effort to stop eroding per wafer revenue, he said.
TSMC's capital spending in 2008 will be an estimated 15 percent of revenue, and UMC's 16 percent, McClean said, down from 26 percent and 23 percent, respectively, in 2007. "These guys are not going to chase the last few points of market share like they used to," he said.