Semi industry in 2007 was disappointing, 2008 to be more respectable, firm says

By Ann Steffora Mutschler, Senior Editor -- Electronic News, 12/7/2007

In line with the SIA’s positive forecast for 2008, but in contrast to others, market researchers at Future Horizons believe after a dismal 2007, 2008 will be a better year for the semiconductor industry.

Future Horizons reminded that IC sales were down 6 percent in the first half of 2007 compared to the second half of 2006, with recovery only starting at the beginning of Q3 for overall growth for the year expected to be 5 to 6 percent.

“It was a disastrous start to 2007 but thankfully the market fell in line with normal seasonal patterns by the start of the third quarter. Unfortunately, it has been a case of too little too late, hence our overall growth expectation for the year now in the disappointing 5 to 6 percent range,” noted head analyst Malcolm Penn.

2007 is now the third consecutive year of single digit growth following the last boom years of 2003 and 2004 when the industry grew an impressive 18.3 and 28 percent, respectively, Future Horizons pointed out, with the reason for this year’s low growth being declining ASPs, given that unit growth for the year is expected to end up at a respectable 12 percent.

While this was lower that the 18.1 percent in 2006, it was more sustainable and in line with the industry’s 10 percent long-term average, especially given the current above-average global GDP growth, the firm said.

Penn continued, “On the face of it, this represents quite a dramatic industry slowdown, but the silver lining is the fact that the underlying causes were structural market corrections and not a full-blown semiconductor recession.  This distinction is very important, because the industry can bounce back quite fast from a correction, whereas recovery from a recession is a much slower process.”

Looking ahead to 2008, Future Horizons believes semiconductor market growth will recover to a respectable 12 percent level, based on a 10 percent unit growth and a modest 2 percent ASP recovery.

“The economists are not yet forecasting a global economic recession, and until they do, we are confident that 2008 will be a decidedly rosier year for the semiconductor industry,” Penn concluded.