Analog prices will stabilize

By Jim Carbone -- Purchasing, 3/26/2008 9:52:00 AM

Buyers can expect slight price reductions for analog chips this year despite strong unit demand as semiconductor suppliers focus on profitability instead of growing market share.
While the average price of analog chip fell 7% in 2007, in 2008 the price will drop only 1%, according to researcher IC Insights.

The average price of an analog chip fell from 53¢ in 2006 to 49¢ in 2007 and will drop to 48¢ in 2008. After that, it will be mostly flat through 2011, according to IC Insights.

For the next five years IC suppliers are going to be in a better position to command a price that “makes more sense from a profitability standpoint,” says Brian Matas, vice president of research for IC Insights.. “We believe companies have grown extremely tired of just making razor-thin margins," he says.

Matas adds many semiconductor suppliers, including analog IC suppliers, are pulling back on capital spending in an effort to limit capacity growth. That will impact prices, providing that unit growth continues to be strong.

He says this year the overall analog market will grow 9% as revenue rises to $39.8 billion. "Supply and demand are in better balance this year and we see traction in pricing coming back and it favors the IC supplier," says Matas. However, buyers should not worry too much because prices won’t actually increase; they’ll just become more stable.