SIA lowers 2008 sales growth estimate on memory price erosion

The news isn't all bad. "Key end-markets that drive demand for semiconductors continue to be healthy," said SIA President George Scalise, noting PCs and consumer products.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 6/11/2008

Memory has, once again, pulled down a total 2008 semiconductor market growth forecast from a major industry watching group. 

The Semiconductor Industry Association (SIA) today trimmed its full-year semiconductor sales growth estimate from 7.7% to 4.3% on continued strong competition in memory chips. The competition, especially in the DRAM segment, has caused price erosion within the memory segment that has slowed overall industry growth. SIA reported that total semiconductor sales excluding memory products are forecasted to grow by 7.4% in 2008.

Today’s mid-year forecast from the group predicts 2008 sales will reach $266.6 billion and grow to $324.1 billion in 2011 at a compound annual growth rate (CAGR) of 6.1% for the period. The revised forecast projects that sales will grow by 6.2% to reach $283.2 billion in 2009 and by 8.4% in 2010 to $307 billion.

“Key end markets that drive demand for semiconductors continue to be healthy,” said SIA President George Scalise (pictured right) in a statement. “Sales of personal computers, the largest single market for semiconductors, continue to be strong, especially in emerging markets. Total unit sales of PCs are on pace to grow by 10% this year to around 300 million units. Cell phone unit shipments are expected to grow by about 12% to more than 1.3 billion units, with the largest growth coming from China, India, and other emerging markets.”

SIA reported that unit sales of many other consumer products continue to be strong despite widespread concerns about consumer confidence and rising energy prices. Unit sales of flat-panel televisions, for example, are expected to grow by more than 29% and digital cameras are forecasted to grow by 11% in 2008.

Just as VLSI recently stated in its forecast, SIA maintained that continued price pressure in the memory sector is the chief reason for lowering its sales forecast. SIA warned of such a situation when reporting on Q1’s semiconductor sales and the quarter’s weak memory revenue showing.

“DRAM revenues declined by 34% even as unit shipments increased by more than 30% in the first four months of 2008 compared to the same period last year. A recent JPMorgan report projected a 65% increase in DRAM bit shipments in 2008. Memory products account for about 20% of total semiconductor sales,” Scalise said. 

Microprocessors, which account for approximately 14% of total semiconductor revenues, have experienced healthy unit sales growth to date in 2008, according to SIA data. The industry group expects MPU revenues to grow more than 10% per year for the next two years. 

Analog products, which account for about 14% of total semiconductor demand, are expected to grow at a compounded annual growth of 5.3% over the forecasted two-year period, SIA said, noting that consumer and communications applications continue to drive demand for these products.

Logic products – including both standard and special-purpose logic – are expected to grow by 10.8% this year based on strong demand from a variety of end markets including consumer products, SIA reported.

“Worldwide revenues will continue to grow throughout the forecast period, reaching historic highs each year,” said Scalise.