SAN FRANCISCO—This year has been a "two for one deal," with both semiconductors and chip manufacturing equipment cramming two typical years of growth into one year, resulting in overcapacity and declining chip prices, according to market research firm VLSI Research Inc.
VLSI (Santa Clara, Calif.) revised its projections for the chip and chip equipment markets in 2011 and 2012. The firm said it now expects chip sales to increase only 4.4 percent to $248.6 billion in 2011 and grow an additional 7.9 percent in 2012. VLSI previously said it expected chip sales to grow by 8 percent next year.
VLSI cited an increasingly difficult pricing environment, resulting from the rapidly increasing production capacity as the major contributor for sluggish sales growth in 2011. This challenge is not only limited to DRAM markets but also other major IC sectors as well, the firm said.
VLSI currently projects that the semiconductor market will grow by 31 percent this year, reaching $259.6 billion. The company had previously projected IC market growth of 32 percent in 2010.
In chip equipment, VLSI said it now expects a 5 percent sales decline in 2011 to $46.3 billion. The firm previously said it expected chip equipment sales to grow 10.6 percent in 2011 after growing 103 percent this year.
In 2012, VLSI projects that the chip equipment market will rebound to grow 7.2 percent, reaching $49.7 billion.
Semiconductor equipment demand is slowing due to excess supply in DRAM markets, according to VLSI, which expects other major segments experience flat year in 2011.