Gartner inches up chip forecast, still wary of macroeconomics

June 3, 2008 – Gartner has slightly raised its forecast for worldwide semiconductor market growth in 2008, from 3.4% to 4.6%, saying that things seem stable and “seasonally normal” with healthy end-market demand despite macroeconomic concerns.

Global semiconductor sales were “seasonally normal” in 1Q08 thanks to “healthy PC and cell phone unit production,” notes analyst Richard Gordon in a research note. He sees “no signs of a significant slowdown” for digital consumer electronic products and automotive electronics, likely the two worst-hit segments if consumer discretionary spending suffers. Also, suppliers’ 2Q08 sales forecasts suggest they think the market won’t worsen, he said.

Still, Gordon cautions that supplies are still a concern, having increased the past three quarters, and if the inventory build doesn’t reverse in 2Q “then it may be a sign that demand is faltering.”

Scanning the semiconductor landscape shows little change across most device and electronic equipment sectors, but Gordon does note marginal improvement in commodity memory, causing him to significantly boost its unit production forecast for portable navigation devices. That one tweak is what’s behind the slight increase in his overall revenue forecast update for 2008, from 3.4% to 4.6% annual growth.

Looking ahead to 2009, Gordon has slightly reduced his outlook to 7.9% growth from 9.4%, seeing renewed demand in a macroeconomic upcycle, with supplies tightening thanks to reduced capex this year. Growth will slow more in 2010 (to 6.4%) ahead of a cyclical trough in 2011 (0.4% growth), and swinging back up again in 2012 (5.6%). CAGR for the period 2007-2012 is pegged at 4.9%.


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