SIA Tapers Forecast Due to DRAM Slump

Laura Peters, Editor-in-Chief -- Semiconductor International, 6/13/2008 8:54:00 AM

The Semiconductor Industry Association (SIA, San Jose) adjusted its 2008 semiconductor forecast down from 7.7% growth to 4.3% on continued pricing pressure for DRAMs. Nonetheless, George Scalise, SIA president, referred to the current period as one enjoying strong growth because of strength of the digital consumer and growth in many regions of the world, including India, China and Eastern Europe.

Scalise presented an encouraging forecast during the mid-year forecast webcast aired Wednesday on Semiconductor.net, which looked at the semiconductor market extending out to 2011. In fact, if it were not for memory devices, particularly DRAM, semiconductor sales in 2008 would likely be up 12+% vs. last year. It is the severe slashing of DRAM prices, down 42% vs. 2007, that brought revenue growth in April 2008 year-over-year to ~6% (Fig. 1). By the end of 2008, the market is expected to hit $267B for a growth rate of 4.3%, down from the 7.7% expectation of last November’s forecast. “Although the macro economic situation has its uncertainties, the semiconductor industry continues to show strong growth,” Scalise said.

1. Demand for microprocessors, DSPs and NAND flash drives strong growth, while DRAM pricing tapers revenue growth to ~6% in April YoY. (Source: SIA)

Scalise called attention to the fact that despite rising energy costs, particularly over the past year, consumers in the United States and elsewhere still find discretionary spending for electronic products. “We see no visible impact of energy prices yet,” he said. Part of the reason for this is that semiconductor demand is truly global and increasing spurred by regions of the world that are growing at rates of ~10%/yr, such as India and China.

Global demand from the digital consumer drives more than 50% of industry. In 2008, more than 1.3 million cell phones, 100 million LCD TVs and 127 million digital cameras will be sold. Aside from memory, Scalise pointed to an overall supply/demand balance that is reflected in the capacity utilization at all fabs, which is ~90% at all fabs, 94% at foundries and 97% at leading-edge fabs (<80 nm). SIA’s forecast for capital spending in 2008 is 13.5% of revenues; it was 16.5% in 2007 (Fig. 2).

2. Capital spending is down in 2008 relative to 2007, at 13.5% of revenues vs. 16.4% last year. (Source: SIA)

With respect to the NAND flash and DRAM markets, Scalise commented that these commodities will eventually balance out and the industry will see more stable pricing.

When asked whether the upcoming election would have an effect on the semiconductor market, Scalise commented that the SIA does not endorse candidates nor does it perform fundraising. However, the organization is deeply concerned about issues that affect industry growth, such as continuation of the R&D tax credit, which SIA would like to see made permanent, as well as immigration reform to allow talented graduates to stay and work in high-tech fields in the United States.