iSuppli trims 2008 semi revenue forecast on economic fears, memory oversupply

Memory market conditions will be very poor during the first half of 2008, with prices falling due to oversupplied conditions for DRAM and NAND flash, the firm reports.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 12/21/2007

The growing gloom and doom of the global economic situation has claimed another victim, this time spurring iSuppli Corp. to trim its 2008 semiconductor revenue forecast.

Citing global economic woes that include rising energy costs and the sub-prime mortgage crisis in the United States, iSuppli Thursday reduced its forecast by 1.8% to estimates of 7.5% year-on-year growth for 2008 revenues of $291.4 billion. In September, the firm predicted a 9.3% increase for the coming year.

“These factors will contribute to underinvestment and nervous customers in 2008, restraining growth as they cut orders,” iSuppli said in its report.

While the firm stressed that it still expects a positive year for the market, particularly in the second half, 2008’s first half will see “extremely weak” market conditions that will see global chip revenue decline to $135.9 billion, down 4.5% from $142.3 billion in the second half of 2007.

Memory market conditions will be very poor during the first half of 2008, with prices falling due to oversupplied conditions for DRAM and NAND-type flash memory early in the year, the firm said, seconding comments made by distributor Converge earlier this month.

ISuppli this week reiterated estimates for a Q2 2008 DRAM pricing recovery and maintained that NAND will not begin to rebound until Q3 2008. Because of this staggered recovery, the firm said the impact of memory's resurgence will not be felt by the overall semiconductor market until Q3.

“With memory devices expected to account for 21.6% of global semiconductor revenue in 2008, developments in this market will have a major impact on the overall chip industry. The normal, seasonal up tick in semiconductor sales will drive the recovery in memory in the second half,” iSuppli said.

However, the firm cautioned that the potential arrival of a much-feared recession in 2008 could put a damper on this expected growth, and may scuttle the anticipated second-half recovery.

Gartner has also warned of the impact of such a recession. In mid-November, the research firm reported that a mild recession could cause revenue at equipment companies to drop as much as 15 to 20% in 2008, while chip company revenue may decline in the mid-single-digit range. Following that estimate, Gartner this week estimated that worldwide semiconductor equipment spending could drop nearly 10% in 2008 to $40.3 billion from 2007 spending of $44.8 billion.

Along with the reduction in the semiconductor outlook, iSuppli reduced its 2008 growth forecast for all types of electronic equipment.

Global electronic equipment revenue is expected to rise to $1.6 trillion in 2008, up 6.6% from $1.5 trillion in 2007. This is down 0.4 of percentage point from iSuppli's previous forecast of 7% growth.

Notebook PCs and 3G mobile handsets, both of which attained strong growth in shipments in 2007, will not be as fortunate in 2008, according to iSuppli. Without giving a specific estimate, the firm said it does not expect these categories to reach the same levels in 2008.

ISuppli also said that big price reductions for digital televisions in 2007 boosted sales vigorously, but, without these price cuts next year, the same level of growth will not be achieved.

2007 estimates upped

On the bright side, iSuppli boosted its forecasts of semiconductor and electronic equipment revenue for 2007, now predicting global semiconductor revenue will increase to $270.9 billion in 2007, up 4.1% from $260.2 billion in 2006. The firm in September predicted a 3.5% increase in annual revenue.

“The anticipated second-half surge in chip sales was stronger than expected for most semiconductor types due to increased demand and lengthening lead-times, creating a more stable pricing situation. However, memory chip revenue came in below expectations because of oversupply and declining prices in this product sector,” the firm said.

ISuppli also raised its 2007 electronic equipment forecast to 7.4% growth, up from 6.8% before due to the strong sales of notebook PCs and 3G handsets during the year.



For more estimates on 2008, see:

SIA maintains rosy 2008 semiconductor forecast, others expect recession

China chip market to grow 15% in 2007, 12% in 2008

WW semi capital equipment spending to drop 10% in 2008, Gartner predicts

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

2008 capital spending to shake IC industry foundation, IC Insights reports

Gartner warns of 2008 semi industry downturn