September 26, 2007 – A current upswing in memory and electronic equipment can’t offset what was a horrid performance in the first six months of the year, according to iSuppli Corp., which has again shaved its outlook for 2007 chip sales to just 3.5% growth, from expectations of 6% growth back in June. But the firm emphasizes that the worst is well behind the industry, and growth in 2008 should be a little better than anticipated.

Global chip sales are now seen rising 3.5% to $269.9B this year, after slumping 6% just in 1H07 alone. But iSuppli projects 2H07 chip sales will rise 10% vs. 1H07, with a 10% sequential surge in 3Q sales, and another 4% sequential rise in 4Q.

Memory ICs sunk 13% in the first half of the year (-10% in 1Q, -23% in 2Q) as the bottom fell out of ASPs due to a market glut of product, notes Gary Grandbois, principal analyst with iSuppli, in a statement. An output ramp by DRAM suppliers in the first half of the year caused the oversupply condition, which will lead to a “stunning” 94% surge in bit shipments this year, vs. 55%-60% for the industry average, the firm noted.

Since midsummer, though, the industry has seen “a revival of growth” as DRAM suppliers reign in production growth and memory prices recover, in addition to a stronger end equipment market and the normal year-end seasonal strength. A dulling of ASP erosion and seasonal demand for PCs will push memory ICs sales up 15% for the second half of the year (+20.8% in 3Q, flat in 4Q).

The recovery in the NAND market is even more dramatic. Prices are rebounding after a 40% drop in per-megabyte prices in 1Q, and after a 20% decline in 1Q, NAND sales have been in the black (+14.7% in 2Q, and projections of +37.5% in 3Q and +6.5% in 4Q).

The stabilizing prices in both DRAM and NAND are expected to put both segments into positive growth for the entire year: +2.5% for DRAM, and 15% for NAND. And “the resurgence will have legs,” the firm notes, projecting memory revenue growth will continue in 2008 to underpin a total IC industry growth of 9.3%.

Global semiconductor forecast, 2007-2011
(Revenues in US $B)

…………………….2007………………..2008………………..2009………………..2010………………..2011
Jan. 2:……….285.8 (10.6%)……….310.5 (8.6%)……….322.0 (3.7%)……….346.0 (7.4%)……….N/A
April 24:…..281.4 (8.1%)……….306.1 (8.8%)……….315.7 (3.2%)……….347.5 (10.1%)……….371.6 (6.9%)
June 20:…..276.6 (6.0%)……….300.9 (8.8%)……….308.9 (2.7%)……….335.1 (8.5%)……….365.3 (9.0%)
Sept. 26:…..269.9 (+3.5%)…..294.9 (+9.3%)……….301.5 (+2.2%)……..325.4 (+7.9%)……..352.2 (+8.2%)

Source: iSuppli Corp.