Electronics Production | October 10, 2008

iSuppli trims 2008 Chip Forecast and sees Warning Signs for Market

iSuppli Corp. has trimmed its forecast for 2008 worldwide semiconductor revenue growth, but is warning of significant potential downside if economic conditions continue to worsen.
Global semiconductor industry revenue is expected to rise to $280.1 billion this year, up 3.5% from $270.6 billion in 2007. iSuppli’s previous forecast, issued in August, predicted 4% growth for the year. The attached figure presents iSuppli’s forecast of global semiconductor revenue.

The U.S. Semiconductor Industry Association this month reported global semiconductor sales rose 5.5% in August compared to a year earlier, indicating that chip sales growth continues to track according to iSuppli’s expectations. However, signs appeared in September that the semiconductor market may be feeling the impact of the credit crisis and economic downturn.

“The credit crisis is impacting the semiconductor market on several levels,” said Dale Ford, senior vice president, market intelligence, for iSuppli. “The first level is demand for electronic equipment from the Wall Street firms themselves, which is expected to drop and thus decrease demand for semiconductors. The second level, and a much more significant factor, is the impact on corporations in general. With companies unable to get credit, the crisis could spread to the wider economy, impacting demand for electronic equipment and semiconductors. The final level, and the most significant area of impact, is the broader effect on consumer confidence and spending if the overall economy collapses.”

The DRAM drag
In its latest 2008 semiconductor forecast, iSuppli has significantly downgraded its outlook for memory revenue, particularly DRAM. iSuppli lowered its 2008 semiconductor memory revenue forecast by 5.8 percentage points, and its DRAM outlook by 5.4 points.

With memory expected to account for nearly 10% of global semiconductor revenue in 2008, this represents a major drag on global semiconductor revenue.

However, iSuppli significantly boosted its forecast for global Application Specific Standard Product (ASSP) semiconductors, compensating somewhat for the memory forecast downgrade. iSuppli raised its 2008 ASSP revenue forecast by 3.2 percentage points for the year. ASSPs represent a broad category of integrated circuit semiconductors that provide key functionality in all types of electronic equipment, from mobile-handset basebands to hard disk drive controllers.

However, new signs of weakness have mounted in the DRAM market in recent times. iSuppli in September cut its rating of near-term conditions for DRAM suppliers to “Negative,” down from “Neutral” before. Long suffering from a glut of parts, the DRAM market began to note a weakening in demand from the key PC market in September.

PC demand continued to defy the economic downturn through the second quarter, and iSuppli remains cautiously optimistic regarding sales through the remainder of the year. iSuppli now holds a prediction of 12.5% growth in PC unit shipments in 2008. However, iSuppli has noted some weakening in demand from PC makers since the start of September.

iSuppli will continue to monitor the DRAM and PC sector closely to see how changing market conditions may impact the overall semiconductor business.


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