March 6, 2007 – Citing reasons for a sluggish start to 2007, including soft end markets and an inventory surplus weighing 1Q07 chip sales, Gartner Dataquest has revised its full-year outlook for chip sales to 6.4% growth, vs. estimates of 9.2% just two months ago. The firm also has slightly lowered its outlook for 2008, seen as the next cyclical peak, to 8% from a projected 11.6% in previous forecasts.
While negative market factors in 1Q are “nothing more serious than the usual seasonal slowdown” and projecting a return to sequential growth in 2Q, Gartner analyst Richard Gordon wrote in a report that nonetheless, the picture for overall annual growth in 2007 “depends on the severity of market weakness in 1H07 and the strength of any recovery in 2H07.”
Downgrades in Gartner’s’ growth estimates span the board of chip devices. Weak average selling prices for commodity memory will hold that segment to just 6% growth in 2007, vs. previously-projected ~9.7%, primarily due to ongoing weakness in average selling prices (ASP). The firm has also reduced its outlook also for microprocessors (3%, down from 4.6%, hampered by pricing wars), general-purpose analog ICs (6% from 8%, due to excess inventories), and ASSPs (7% vs. 12.1%, hurt by declining ASPs). Sales of ASICs are expected to remain basically flat at 10% thanks to rollout of new gaming platforms.
Gartner’s five-year outlook (CAGR 2006-2011) for growth now stands at 6%, vs. 7.8% from CAGR 2005-2010, “reflective of the slowing industry,” Gordon wrote.
In a separate report, Gartner also significantly lowered its outlook for the FPGA/PLD market, which “took a steep turn for the worse” in 2H06 “and is struggling to recover in 2007.” The firm now sees just 2.9% growth for this segment, due to a number of factors including: inventory buildup across application markets; slowing growth in wired communications, industrial, and wireless base stations; FPGAs being designed out of some high-volume consumer displays; and rapidly-falling prices for low-cost FPGAs in high-volume applications.
Despite the doom and gloom for 2007 following a 13% expansion in 2006, Garter analyst Bryan Lewis wrote that this year will an “anomaly” and the segment should return to outperforming the overall semiconductor sector in 2008, with 15.7% growth to $4.33 billion worth of consumption. That’s below earlier predictions of >23% growth, due to a range of factors (e.g., slower growth in wired communications markets, slow volume ramps for auto designs, cost pressures). Still, he maintains that FPGAs/PLDs have a very bright future, but not to the same magnitude we previously projected.”
Worldwide FPGA/PLD consumption (US $M)
……………………….2006……..2007……..2008……..2009……..2010……..2011
Consumption……3640……..3745……..4331……..4645……..5266……..6036
Growth %…………….12.9……….2.9……….15.7……….7.2……….13.4……….14.6
WaferNEWS Source: Gartner Dataquest