Gartner: NAND woes already denting 2008 outlook

Mar. 4, 2008 – Visibility isn’t improving much in the semiconductor industry, but Gartner Dataquest already doesn’t like what it sees, particularly in the memory sector — this time it’s NAND flash — so the analyst firm is chopping its outlook for 2008 growth nearly in half to 3.4%.

Noting “some weakening in short-term semiconductor demand,” slowdown or recession in the US economy, and a projected decline in global GDP this year, Gartner was already watching for a slowdown this year, according to a research note penned by analyst Richard Gordon. Now, he says that “the demand side of the semiconductor industry could get much worse, which could cause a contraction in the market this year.”

But even more important are changing trends in the commodity memory market, which Gordon notes are impacting its market assumptions not just in 2008, but all the way out to 2012. A weakening global economy won’t change the current DRAM recession that started in 2007, but could push the start of a recovery out into 2009, he says. DRAM sales are still expected to decline 15% this year, with pricing pressures sustained through 3Q08.

A bigger problem is emerging in the NAND flash sector, where Gartner has halved its 2008 market growth outlook to just 15%. “This market witnessed a challenging end to 2007 and a rough start to 2008 because of severe oversupply and continued downward pricing pressure, and we see no respite in the short term,” he writes.

Gordon notes there should be a rebound in 2009 with 9.4% market growth “as the macroeconomic cycle plays out,” bringing renewed demand at the same time as supply tightens caused by reduced capital spending in 2008. Longer-term, he pegs 6.5% growth in 2010, a cyclical downturn to flat growth (0.7%) in 2011, followed by another upturn in 2012 (5.3%). CAGR during the period (2008-2012) is pegged at 5%.


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