May 31, 2007 – Eying severe DRAM pricing declines and continued MPU price wars, analyst Gartner Inc. has once again lowered its outlook for chip sales, now projecting just 2.5% growth in 2007, down from 6.4% expectations in early March and 9.2% in January.
The downgrades in 2007 chip sales, along with perceived lower capital spending in the short term, also basically push out other forecast projections by several quarters — meaning that the next cyclical peak, previously seen squarely in 2008, now will somewhat extend into 2009, followed by an industry downcycle starting in 2010 and into 2011. “This is really to do with the capex profile in 2006 through 2008, which suggests that 2007 will be weaker but 2008 and 2009 stronger based on supply side fundamentals,” explained Richard Gordon, managing VP, semiconductors, Gartner, in an e-mail Q&A with WaferNEWS.
1Q07 chip sales dropped 5% from the prior quarter, more than would be expected from normal seasonal inventory buildup, noted the firm. “Soft semiconductor market conditions have been exacerbated by sharply declining ASPs in key device markets such as DRAM, MPU and application-specific standard products (ASSPs),” noted Gordon, in Gartner’s PR statement. He added that device ASPs will continue to feel downward pressure despite continued growth for much of this year due to oversupply conditions.
Gartner’s view of the memory market is significantly more pessimistic than before — projecting a -4.7% decline, vs. 6% growth in the firm’s March update. DRAM sales are seen slumping -11% this year to $30.5 billion even as bit growth strengthens, with a “mild revenue decline” extending into 2008 with lingering excess capacity and price declines, though quick capacity adjustments now and a push back into NAND production could soften the blow.
“Samsung is the key,” Gordon emphasized to WaferNEWS. The chip giant has watched DRAM share bleed over to rival Hynix recently, and Samsung has stated that it will outgrow the DRAM market in 2007 to win back at least some of that share, he noted.
For NAND, they key driver to watch will come from Apple — but not the soon-to-arrive iPhone, despite all the hype surrounding it, Gordon said. Rather, he thinks the real issue will hinge on the possible launch of a video iPod, and the timing of the introduction of a 32GB version.
Gartner’s semiconductor forecast, then & now
(US $B and % growth)
……………………2007…………………2008……………………..2009……………………..2010
Jan. 1……….283.0 (9.2%)……….315.9 (11.6%)………..312.8 (-1.0%)………..340.9 (9.0%)
Mar. 6 ……….276.3 (6.4%)………..298.4 (8.0%)…………..n/a (n/a)…………………n/a (n/a)
May 31……..269.2 (2.5%)……..292.6 (8.7%)……..313.5 (+7.2%)…….316.4 (0.9%)
WaferNEWS source: Gartner Inc.