April 24, 2006 – Citing a number of factors ranging from mobile-phone shipments to lingering excess inventories and a slumping DRAM market, iSuppli Corp. has issued a “modest” revision, lowering its outlook for 2007 semiconductor sales to about 8% from 10.6%.
“Some weakening of end-markets seen late in 4Q06, an excess inventory problem that carried over into 2007, and an anticipated drop in the mobile-phone market have contributed to a less-optimistic outlook for the semiconductor market in 2007,” said Gary Grandbois, principal analyst for iSuppli, in a statement. He noted, however, that the revision is “relatively modest” and much of it is centered only on reductions in the memory market.
Excess inventories in the global electronics supply chain were worked down a bit in 1Q (to $2.8 billion), but are still high enough to have a negative impact on semiconductor output and pricing, the analyst noted.
Part of the less-optimistic outlook for 2007 semiconductor sales is a “dramatic” slowing in growth in mobile phones. Wireless communications equipment, dominated by mobile phones, is seen rising 4.3% to $202.3 billion, half the growth rate from a year ago.
But the real problem weighing down chip sales is memory, particularly DRAM. The segment enjoyed a 35% surge in sales last year to $33.9 billion, and was expected to decelerate this year to about 13% growth — but now iSuppli thinks it’ll be a steeper slide, to just 8.6% growth (to $36.9 billion). The culprit: oversupplies as memory suppliers shift capacity from lower-margin NAND flash over to DRAM output, causing DRAM prices to plunge.
“With DRAM expected to account for 13.1% of overall semiconductor revenue in 2007, a 4.4 percentage-point reduction in the outlook has a significant impact on the overall chip market,” the firm noted.
Flash memory isn’t helping the cause either — overall flash sales are expected to decline 3.3% this year, following 11.1% growth in 2006, mainly due to a weak NAND sector that has also seen prices fall through the floor.
iSuppli also has tweaked its outlook for total electronic equipment (including data processing, wired/wireless communications, consumer, automotive, and industrial) to 6.3% growth in 2007 (to $1491.0 billion), instead of 6.7% growth. Equipment markets contributing to the slower growth this year include consumer electronics and industrial gear, with a marginal decline in the computing equipment segment as well, the firm noted.
Worldwide semiconductor and electronic equipment forecast
(Revenues in US $B)
………………………………..2007………………….2008…………………..2009…………………..2010…………………..2011
Semiconductors:
OLD:…………………285.8 (10.6%)……..310.5 (8.6%)……..322.0 (3.7%)……..346.0 (7.4%)……..N/A
NEW:………………..281.4 (8.1%)……….306.1 (8.8%)……..315.7 (3.2%)……..347.5 (10.1%)…….371.6 (6.9%)
Equipment:
OLD:………………1466.4 (6.7%)……1551.5 (5.8%)……..1621.5 (4.5%)……..1696.3 (4.6%)……..N/A
NEW:……………..1491.0 (6.3%)……1569.5 (5.3%)……..1651.7 (5.2%)……..1748.3 (5.8%)……..1829.6 (4.7%)
WaferNEWS source: iSuppli Corp.