Gartner Says Worldwide Semiconductor Market to Grow Just 2.5 Percent in 2007

Gartner Says Worldwide Semiconductor Market to Grow Just 2.5 Percent in 2007

Analysts Revise Forecast Downward Because of Declining DRAM and MPU Prices

Due to more severe declines in dynamic random-access memory (DRAM) average selling prices (ASPs) than previously expected and continued price competition in the compute microprocessing unit (MPU) segment, Gartner, Inc. has lowered its 2007 worldwide semiconductor forecast to $269.2 billion, a 2.5 percent increase from 2006. In Gartner’s previous forecast, it predicted a 2007 revenue increase of 6.4 percent.

Gartner analysts said semiconductor sales in the first quarter of 2007 were more than 5 percent lower than in the fourth quarter of 2006, which was worse than the expected decline that would normally be associated with a seasonal build up in inventory levels at year end.

“Since the beginning of this year, soft semiconductor market conditions have been exacerbated by sharply declining ASPs in key device markets such as DRAM, MPU and application-specific standard products (ASSPs),” said Richard Gordon, research vice president at Gartner. “It is likely that, despite continued unit growth in influential electronic systems markets, downward device ASP pressure will remain in place for much of 2007 as oversupplied semiconductor market conditions persist.”

The memory market is forecast to decline 4.7 percent in 2007 primarily due to a continued weakening of DRAM ASPs. Gartner’s latest forecast has DRAM revenue declining by 11.1 percent in 2007 to $30.5 billion, despite strengthening bit growth for the year. The DRAM outlook for 2008 is for a mild revenue decline, again attributed to excess capacity and continued price declines. However, the 2008 outlook could improve if DRAM vendors adjust their current capacity plans, or if the NAND flash memory industry begins to see notably strong growth again through demand for portable video players, necessitating vendors to adjust capacity back toward NAND.

The microcomponent market is forecast to be flat in 2007 as the dominant compute microprocessor segment remains mired in fierce price competition between the leading vendors.

The forecasts for general purpose analog IC market growth and discretes market growth have been revised downward marginally to 6.3 percent and 4.3 percent respectively in 2007 as manufacturers take time to recover from excess inventory in 1H07.

Speaking of inventory, Gartner’s analysis of companies involved throughout the supply chain suggests that the increase in overall semiconductor inventory levels observed over the past few quarters may have peaked in the first quarter of 2007 with a trend reversal expected in coming quarters.

“There are still individual sectors where ‘inventory days’ continued to rise, but in most sectors inventories have leveled or are already beginning to decline,” Mr. Gordon said. “This correction is happening sooner than we expected and will have the effect of reducing annual growth prospects in 2007, but it is another indication that semiconductor manufacturers are continuing to aggressively manage output to control inventory levels.”

Gartner expects the worldwide semiconductor industry to return to modest annual growth of 8.7 percent and 7.2 percent in 2008 and 2009, respectively.

Additional information is available in the Gartner report “Semiconductor Market Forecast Alert: 2Q07 Update.” The report is available on Gartner’s Web site at http://www.gartner.com/DisplayDocument?ref=g_search&id=506601&subref=simplesearch.

Gartner analysts will provide detailed analysis on the state of the semiconductor industry during the upcoming Gartner Semiconductor Industry Update: Business Opportunities in a Low Growth Semiconductor Market. The briefing will take place June 7 at the DoubleTree Hotel in San Jose. More information on the briefing is available at http://www.gartner.com/it/page.jsp?id=504663. Members of the media can register by contacting Beck Tonnesen at becky.tonnesen {at} gartner(.)com.

Contact:

Christy Pettey
Gartner
+1 408 468 8312
christy.pettey {at} gartner(.)com

About Gartner:
Gartner, Inc. (NYSE: IT) is the world’s leading information technology research and advisory company. Gartner delivers the technology-related insight necessary for our clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to technology investors, we are the indispensable partner to 60,000 clients in 10,000 distinct organizations. Through the resources of Gartner Research, Gartner Consulting and Gartner Events, we work with every client to research, analyze and interpret the business of IT within the context of their individual role. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 3,800 associates, including 1,200 research analysts and consultants in 75 countries. For more information, visit www.gartner.com.