LONDON Market research group Future Horizons has lowered its bullish forecast for semiconductor growth in 2006 to 14 percent from the 20 percent it predicted in January, coming significantly closer to the consensus of industry watchers of between 9 and 11 percent growth for the year.
“We believe the fundamentals are still there for an excellent year, but we have grudgingly conceded the mathematics just does not add up anymore,” said Malcolm Penn, founder and CEO of Future Horizons (Sevenoaks, England). Penn also downgraded his forecast for next year, and now suggests 2007 will see growth of 19 percent, as opposed to the original estimate of 22 percent.
“We did not build into our early estimates the price wars of for example Intel versus AMD in microprocessors and Hynix against Samsung in flash,” said Penn at his company’s mid-year industry forecast conference held in London Tuesday (July 25).
“What these companies are doing in relation to ASPs is the semiconductor industry at its time-honored best – bomb the price as a line of first resort – and the only winner is the consumer,” said Penn.
Despite his lowered forecast, Future Horizons is still at the top end of estimates for 2006 growth, with others, who were perhaps too bearish, raising their estimates.
The Semiconductor Industry Association, for instance recently boosted its projected global chip sales for the year to 9.8 percent, or a market worth $249 billion, up from an earlier estimate of 7.9 percent growth.
Meanwhile iSuppli Corp upped its IC forecast by a more sober 0.5 percent to 7.9 percent, and suggested higher the than expected growth in the first quarter of the year will be followed by more sluggish sales in the second half of the year.
Penn anticipates a “robust” second half and a potential for capacity shortages, and suggests average selling prices are finally in recovery mode. “So we are not ruling out completely a 20 percent increase, but it will be very difficult, because the continuing problems at Intel, declines at AMD and standstill at for instance Infineon unlikely to balance out good performances at Freescale Semiconductor, TI and Hynix.”
Future Horizons had to lower its forecasts last year as well, having predicted 15 percent growth for 2005 for most of the year, but eventually lowering this to between 8 and 10 percent in October 2005, and already suggesting then 20 percent for 2006.