iSuppli lowers semi sales forecast to 4%

For the second time this year, the market research company has lowered its expectations for semiconductor sales in 2008.

By Ann Steffora Mutschler, Senior Editor -- Electronic News, 4/9/2008

Consumers, as well as global semiconductor and electronic equipment suppliers, are all feeling the pressure of the economic downturn and face slowing demand this year, according to El Segundo, Calif-based market research company iSuppli Corp.

The widespread slowdown is expected to dampen worldwide OEM revenue for all types of electronic equipment, given that five of the six major segments of the global electronic equipment business (computers, industrial equipment, automotive gear, and wired and wireless communications) are expected to see lower growth in 2008 than they did in 2007, iSuppli said today in a report.

This situation will result in electronic equipment OEM revenue growth of 5.9%, down from 7% in 2007, iSuppli predicted. The company previously forecasted 6.6% growth this year for OEM electronic equipment revenue.

Indeed, this will have a negative impact on semiconductor sales, which now are expected to rise only 4% to reach $279.6 billion in 2008, from $268.9 billion in 2007. ISuppli's previous semiconductor forecast last month called for 7.5% revenue growth this year.

ISuppli also expects semiconductor revenue to reach $303.3 billion in 2009, $326.2 billion in 2010, $340.4 billion in 2011, and $367.6 billion in 2012.

“Revenue growth in each electronic equipment segment is being impacted by a variety of specific factors. However, the macroeconomic impact of the US subprime mortgage crisis is the underpinning of the market slowdown. The global electronic equipment market has posted five strong years of growth in a row. But weakness in some application markets coupled with a slowing trend in global economic conditions, led by a US slump, dim the prospects for strong equipment growth in 2008,” commented Gary Grandbois, principal analyst at iSuppli, in a statement.

ISuppli is not alone in lowering its 2008 estimates on economic conditions. Market projections from In-Stat were also recently lowered to forecast just 2.4% semiconductor market sales growth for 2008. Gartner also has cut its estimates for 2008 semiconductor market growth nearly in half to 3.4% on a more-cautious demand-side outlook, much of which the firm said is being influenced by DRAM and NAND. 

Broken out by segment 

In terms of worldwide electronic OEM equipment revenue, iSuppli said the biggest single area of slowdown this year will be in wired communications gear used for telco and cable network infrastructure, with equipment revenue growth in this area amounting to only 3.6% in 2008, marking a steep decline from 13% growth in 2007.

Spending last year was driven by the rise of metro and long-haul network upgrades by global telco providers, but this year spending on equipment for those deployments has mostly been completed, which has slowed growth substantially, according to the market research company.

The wireless communications equipment segment is dominated by mobile handsets, and is expected to see the next biggest slowdown with growth of 8.2% in 2008, down from 11.1% in 2007. ISuppli reported that while unit growth for mobile handsets is expected to be healthy, falling average selling prices (ASP) for older 2G mobile handsets is restraining revenue growth in the global handset market. As a result, global semiconductor revenue growth for wireless semiconductors to slow to 1.6% in 2008, down from 2.4% in 2007, iSuppli said.

Meanwhile, the computer segment will experience a relatively mild slowdown this year as global equipment revenue is expected to rise by 8.6%, down from 9.6% in 2007.

And conditions should be brighter in the PC-oriented semiconductor segment, with global revenue growth of 5.3%, compared to a 0.9% rise in 2007, iSuppli forecasted. The cessation of a price war between Intel Corp and Advanced Micro Devices Inc means that ASPs for PC microprocessors will hold relatively steady in 2008, helping the semiconductor segment to grow faster, iSuppli reminded.

Finally, market conditions for DRAM chips used for PC memory are expected to be better in 2008 than they were in 2007, keeping their ASPs high, iSuppli concluded.