iSuppli Reduces Chip Forecast

Staff -- Semiconductor International, 9/26/2007 5:40:00 AM

iSuppli Corp. (El Segundo, Calif.) said today that despite improving chip revenues and a good outlook for electronics systems, the weak memory market in the first half caused it to reduce its forecast for 2007 semiconductor revenue growth to 3.5%.

The market research company earlier had predicted a 6% rise this year. Instead, global chip revenue is now expected to rise to $269.9B in 2007, up 3.5% from $260.6B in 2006. Meanwhile, iSuppli has raised its forecast of 2007 electronic equipment revenue growth to 6.8%, up from 6% previously.

iSuppli sees healthy growth for the chip industry, aided by rebounding memory prices.

“The major cause of the first-half semiconductor industry weakness was a 13% sequential decline in revenue during the period for memory ICs, led by DRAM and NAND-type flash,” said Gary Grandbois, principal analyst with iSuppli.

A rebound in memory IC prices is supporting a 10% increase in the second half compared with the first six months of this year. Semiconductor revenues will rise by 9.8% sequentially in the third quarter and by 4% in the fourth.

With memory accounting for 23% of total semiconductor revenue in 2007, memory IC revenue will increase by ~15% in the second half. DRAM suppliers ramped manufacturing quickly in the first half, causing bit shipments to rise by 94% in 2007, compared with the industry average of 55-60% annual growth. In the third quarter, DRAM suppliers began slowing production growth, causing pricing to stabilize, iSuppli said.

After declining by 10% and 23.8% sequentially in the first and second quarters of 2007, respectively, DRAM revenue will rise at a hefty 20.8% rate in the third quarter and will remain flat with a marginal 0.2% decline in the fourth quarter. Prices for NAND are expected to increase in the third quarter, contrasting starkly to the 40% decline in per-megabyte prices in the first quarter, iSuppli reported.