Electronics Production | April 26, 2007

Chart: 2007 Chip Forecast lowered

A combination of factors, including a deceleration in mobile-phone shipment growth, a lingering excess inventory problem and a major slowdown in the memory market, has prompted iSuppli Corp. to trim its 2007 worldwide semiconductor revenue forecast.
Global semiconductor revenue will rise to $281.4 billion in 2007, up 8.1 percent from $260.2 billion in 2006, according to iSuppli's new forecast. iSuppli previously predicted 10.6 percent growth for the year.

iSuppli's global semiconductor and electronic equipment forecast is presented in the attached figure.

A modest cut
“Some weakening of end-markets seen late in the fourth quarter of 2006, an excess inventory problem that carried over into 2007 and an anticipated drop in the mobile-phone market have contributed to a less-optimistic outlook for the semiconductor market in 2007," said Gary Grandbois, principal analyst for iSuppli. “However, this decline in the outlook is relatively modest—and a large portion of the 2007 forecast downgrade comes from a substantial reduction in the memory chip forecasts, specifically in the memory segment."

Although excess semiconductor inventories in the global electronics supply declined significantly in the first quarter, they remained at $2.8 billion at the end of the period, a level still high enough to negatively impact global semiconductor production and pricing.

Meanwhile, growth in the mobile-phone segment will slow dramatically in 2007 compared to 2006, hurting semiconductor sales. Revenue in the wireless communications equipment sector, which is dominated by mobile phones, will rise to $202.3 billion in 2007, up 4.3 percent from $193.9 billion in 2006. This compares to 8.2 percent growth in 2006.

DRAM deceleration
However, the biggest factor behind iSuppli's forecast revision is a reduction in expected DRAM revenue. The DRAM market hit a peak in 2006, with revenue rising by 35.2 percent to reach $33.9 billion. This surprisingly strong rise will be followed a major slowdown in growth, with revenue rising only 8.6 percent to reach $36.9 billion in 2007.

The primary cause of the reduction is a plunge in DRAM average selling prices as available supplies increase. Memory suppliers are shifting capacity to DRAM and away from less-profitable NAND-type flash in 2007.

iSuppli previously predicted 13 percent growth in DRAM revenue in 2007. With DRAM expected to account for 13.1 percent of overall semiconductor revenue in 2007, a 4.4 percentage-point reduction in the outlook has a significant impact on the overall chip market. Further adding to the memory market's woes, the overall flash market is expected to decline by 3.3 percent in 2007, mainly due to weakness in the NAND sector, iSuppli predicts. Total flash revenue grew by 11.1 percent in 2006.

Equipment outlook lowered
iSuppli also has marginally reduced its outlook for global electronic equipment revenue in 2007, but overall growth in this segment will remain robust, exceeding the recent annual average. Global electronic equipment shipment revenue will rise to $1.49 trillion in 2007, up 6.3 percent from $1.4 trillion in 2006. This compares to iSuppli's previous forecast of 6.8 percent growth. Growth will slow significantly compared to the 7.8 percent expansion in 2006. However, this still represents a strong expansion, with the rise in 2007 exceeding the expected five-year CAGR of 5.5 percent for the global electronic equipment market.

Beyond mobile communications, equipment markets contributing to the slowdown in 2007 compared to 2006 include consumer electronics and industrial gear. Computing equipment revenue will decline as well, but only marginally.


Please note the following: Critical comments are allowed and even encouraged. Discussions are welcome. Verbal abuse, insults and racist / homophobic remarks are not. Such comments will be removed.
Further details can be found here.
Load more news
September 19 2018 10:20 am V10.9.5-1