April 17, 2007 – Inventory adjustments and severe pricing pressures in flash and DRAM memory as well as MPUs have bogged down the market, and IC Insights sees enough historical comparisons in the data to cut its outlook for 2007 semiconductor IC sales growth from 7% to just 2%.

According to the analyst firm, January’s sales decline of 18% vs. December was about where it should be, along historical seasonal norms (-17%). All months that complete fiscal quarters (like December) typically include a five-week accounting period, vs. four weeks for January, so a lower figure is to be expected.

However, February’s numbers were unexpectedly ugly: an 8% decline from January — “by far the largest February sequential decline in the IC market in the past 30 years,” the firm noted, and possibly “the largest February/January decline in the history of the IC industry.” The firm noted that this by itself doesn’t necessarily cast a pall over full-year projections, as three previous February sequential declines happened in three years with very different results: 1985 (bust year, -17% Y-Y IC sales), 2000 (boom year, +37% sales growth), and 2005 (moderate +7% Y-Y growth).

But recent data from Feb. 2007 reflects something more significant, the firm warns, pointing to “severe pricing pressures in the flash memory and MPU product segments, and the recent start of a major DRAM price collapse.” If March 2007 falls in line with the 30-year average March/February IC market increase of about 21%, the firm extrapolates total 1Q07 IC market will be about $49.6 billion — an 11% decline from 4Q06 ($55.7 billion). Even if March data matches the best-ever increase in the past three decades (+36.6% in 2002), total IC sales in 1Q07 would still be 7% below the prior quarter.

That quarterly data comparison, not month-to-month, is the key, according to IC Insights. “The correlation of first quarter IC market results with the entire year results for the IC market is much more significant than when looking at individual monthly data,” the firm said in a statement. Since 1978, there have been only four years in which IC sales declined >4% sequentially: 1985, 1996, 1998, and 2001. “What is unsettling is that these four years also happen to be the only negative growth years for the IC industry since 1978,” the firm warned.