June 13, 2007 – With chip sales “running well short” of last year’s projections for several months now, the SIA has significantly scaled back its expectations for semiconductor industry growth this year. The SIA now projects just 1.8% growth this year to $252 billion, instead of ~10% growth anticipated from its outlook last November.
The big problem has been plunging prices across the big categories of MPUs and memory (both DRAM and NAND flash). Total microprocessor sales are actually seen declining this year by 1.6% due to intense competition and price erosion, despite 10% unit growth from the PC segment. DRAMs, which are suffering from even worse pricing woes — ASPs in April are down 33% from December — are seen with revenues climbing just 2.0% in 2007, a scenario that assumes “continued degradation of prices” due in part to inventory issues.
Even NAND flash, which is underpinned by 20% sales growth in end products such as PMPs and MP3 players, has seen ASPs decline by more than 35% in April vs. a year ago, even as unit shipments surged 54%, Scalise noted.
In a conference call discussing the forecast, Scalise emphasized that because end demand is still strong, these new revenue projections based on pricing pressures could eventually recede, and pave the way for a future upward revision, with revenues increasing “more consistently with unit demand that is out ahead.”
Sales of DSPs should track pretty closely to a projected 10% increase in cell phone sales, Scalise noted. Handset unit shipments are also growing at ~10% (though slowed somewhat), which translates to an additional 100 million units this year, as mature markets buy 3G phones with higher chip content instead of older units.
For the analog segment, Scalise noted there is some softness in ASSPs, perhaps due to inventory issues, which when mixed with overall good unit demand will flatten out the segment’s growth.
Scalise noted that capacity utilization “remains strong” particularly for 300mm fabs, and capital spending will continue to hover at around 20%-22% of industry sales, “a rate that should not lead to excess capacity,” he stated.
He also downplayed concerns of still-too-high inventory levels, pointing to the situation in late 2000 when excess inventories were ~$15 billion, representing roughly 10% of revenues; today we’re only talking about ~$3.2 billion in inventory for a $250 billion market, so it’s not really an issue, he said.
SIA’s reduced chip expectations
(Revenues in US $B)
………………………………2007………………2008………………2009………………2010………………CAGR
Year-end 2006…..$273.8B (10%)…..303.4 (10.8%)…..321.0 (5.8%)…..n/a…..9.2%
Midyear 2007…..252.1 (1.8%)…..272.1 (7.9%)…..287.9 (5.8%)…..305.8 (6.2%)…..5.4%
Source: SIA
Growth forecasts for major product lines
(Revenues in US $M)
Product……………………………2007………..% growth…….. CAGR 2006-2010
Discrete………………………………17.1…………..2.9%……………. 4.3%
Optoelectronics…………………..16.5…………..1.3%……………. 5.7%
Analog…………………………………37.0…………..0.1%……………5.9%
MOS microprocessors…………54.2…………..0.5%…………….5.6%
MPU…………………………………….32.6…………..-1.6%…………….4.9%
MOS logic…………………………….63.6…………..5.7%…………….6.6%
Memory………………………………..58.3…………..-0.3%…………….3.5%
DRAM………………………………….34.5…………..2.0%……………4.5%
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TOTAL IC……………………………213.0………….1.7%…………….5.5%
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TOTAL semiconductor……………252.1…………..1.8%……………5.4%