Gartner cuts chip forecast

Gartner expects the worldwide semiconductor industry to return to modest annual growth of 8.7 percent and 7.2 percent in 2008 and 2009, respectively.

The reduced forecast for 2007 is due to more severe declines in DRAM average selling prices (ASPs) and continued price competition in the compute microprocessing unit (MPU) segment.

Gartner said semiconductor sales in the first quarter of 2007 were more than 5 percent lower than in the fourth quarter of 2006, which was worse than the expected decline that would normally be associated with a seasonal build up in inventory levels at year end.

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

''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,'' he said.

The memory market is forecast to decline 4.7 percent in 2007 primarily due to a continued weakening of DRAM ASPs. Gartner's latest forecast has DRAM revenue declining by 11.1 percent in 2007 to $30.5 billion, despite strengthening bit growth for the year. The DRAM outlook for 2008 is for a mild revenue decline, again attributed to excess capacity and continued price declines.

The microcomponent market is forecast to be flat in 2007 as the dominant compute microprocessor segment remains mired in fierce price competition between the leading vendors.

The forecasts for general purpose analog IC market growth and discretes market growth have been revised downward marginally to 6.3 percent and 4.3 percent respectively in 2007 as manufacturers take time to recover from excess inventory in 1H07.

''There are still individual sectors where 'inventory days' continued to rise, but in most sectors inventories have leveled 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.''