iSuppli Trims 2007 Semiconductor Forecast

Even though some researchers are cutting their forecasts for 2007 semiconductor revenue growth to the 2 percent range, iSuppli Corp. is predicts a 6 percent increase this year. iSuppli trimmed its April forecast of an 8.1 percent increase following weaker-than-expected conditions in the first quarter. Plunging prices for memory chips combined with a significant inventory correction resulted in a 6.2 percent sequential revenue decline during the first three months of the year. “The memory downturn and inventory reduction had been anticipated by iSuppli,” Gary Grandbois, principal analyst for iSuppli, said in a statement. “However, we expected these factors to drive only a 5.4 percent decline in revenue for the quarter.” Nonetheless, Grandbois said semiconductor market conditions remain strong. “Despite the strong price erosion, the market is fundamentally sound,” Grandbois said. He added that the end-equipment market is still vital, with PC and handset unit growth expected to exceed 10 percent. ISuppli expects Global semiconductor revenue will rise to $276.6 billion in 2007, up from $260.9 billion in 2006. Consumer and industrial electronics markets are seeing a slight slowdow, but on the whole, iSuppli expects that the electronic equipment market will grow by 6 percent in 2007. “This will generate continuing demand that will keep semiconductor unit growth up and will generate decent single-digit revenue growth in most segments besides memory and microprocessors,” Grandbois said. Further boosting the semiconductor market, the rate of price erosion is expected to slow in the second half of 2007, according to iSuppli. This will allow the semiconductor market to grow at a relatively robust rate of 8 percent in the second half of the year compared to the first half. In contrast, iSuppli expects global semiconductor revenues to decline by 3 percent in the first half of 2007 compared to the second half of 2006. “Many of the recent pessimistic semiconductor forecasts arise from analysts extrapolating that weak pricing conditions in the first quarter will persist throughout the entire year,” Grandbois said. “iSuppli’s more optimistic outlook reflects our view that pricing conditions will improve in the second half.”