Memory IC price erosion weakens semiconductor industry's growth
By James Carbone -- Purchasing, 10/18/2007 6:00:00 AM
The dramatic decrease in integrated circuit prices in the first half of 2007 has caused market researcher iSuppli to revise its semiconductor market growth forecast for the year. iSuppli says the global semiconductor market will rise only 3.5% to $269.9 billion in 2007, saying first half price erosion for memory chips dampens overall revenue growth for the year. iSuppli's earlier forecast was for 6% revenue growth for the year.
Ironically, the downward revision comes at a time when chip revenue is up, the memory industry is improving and the outlook for electronic equipment markets is on the rise. However, these stronger conditions in the second half of 2007 will be insufficient to offset the impact of the first half's weakness.
Global semiconductor revenue declined by 6% in the first half of 2007 compared to the second half of 2006, limiting the full-year market growth potential.
 Despite slowness in the first half of 2007, the chip industry will stay healthy until 2010. |
"The major cause of the first-half semiconductor industry weakness was a 13% sequential decline in revenue during the period for memory integrated circuits (ICs), led by DRAM and NAND-type flash," says Gary Grandbois, principal analyst with iSuppli. "The memory revenue decline was spurred by a drop in average selling prices (ASPs), which in turn was caused by a glut of parts on the market," he says.
DRAM suppliers in the first half had increased manufacturing. Bit shipments for the year will increase 94% in 2007 compared to the industry average of 55–60% annual growth. This oversupply caused a decline in memory prices that severely impacted the entire semiconductor market. Memory accounts for 23% of total semiconductor revenue.
However, there was a revival of growth due in the second half attributed in part to the normal year-end seasonal strength.
Worldwide semiconductor revenue will rise by 10% in the second half compared to the first—marking a major turnaround in market conditions. Semiconductor revenue will rise by 9.8% sequentially in the third quarter and by 4% in the fourth.
Memory IC revenue will rise by an impressive 15% in the second half compared to the first. Growth will healthy due to traditional strong sales of PCs during the holiday season.
Also contributing to second half will be NAND flash memory. Prices for NAND are expected to increase.
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