In this brave new world of moderating expectations in the semiconductor industry, it seems pessimism is still a hard habit to break. After witnessing some individually disappointing 3Q results and weak 4Q projections, rising inventories in the channel, and softness in some consumer segments (e.g. high-end cell phones and pre-Vista PCs), many Wall Street watchers have generally lowered their 2007 sales growth projections.

But the sector downgrade may be premature, according to brokerage firm Friedman, Billings, Ramsey & Co. Inc. A compilation of Wall Street analysts’ 2007 expectations among the 16 largest chipmakers comes to about 8% Y-Y sales growth on average, below the four-year average Y-Y growth of about 12% (which includes two years of market ups and downs). Individual results vary wildly — Intel and Freescale aren’t far off (7% vs. 8%, and 4% vs. 6%, respectively), but STMicro’s 2007 sales growth is expected to be less than half the 4-year Y-Y average (6% vs. 13%), with even wider gaps at other big-name chipmakers (AMD 15% vs. 36%, TI 6% vs. 18%).

“When companies miss near-term estimates, most of us on the sell side extrapolate the near-term weakness into our out year estimates, the net result being that next year’s estimates come down as well,” pointed out FBR analysts Chris Caso and Elizabeth Pate. However, companies appear to already have adjusted shipments to meet lower demand and reduce inventories, they claim. Certainly there’s a long way to go — inventories remain a clear concern, and most questions about actual consumer demand won’t be answered until after Thanksgiving — but right now, they say, “out year consensus estimates …are simply too low.”

For what it’s worth, back in July WaferNEWS’s poll of industry analysts’ 2007 chip sales forecasts ranged from 10%-20% Y-Y growth. The next round of analysts’ chip sales estimates for 2007 and beyond will begin trickling out later this month. — J.M.