DRAM war forces SIA to slash forecast

Global semiconductor sales won’t rise as fast as previously forecast this year as competition puts a brake on prices, particularly for memory chips, the Semiconductor Industry Association (SIA) has said.

The (SIA) sees global chip sales gaining just 4.3 per cent to $266.6bn in 2008, down from a growth forecast of 7.7 per cent issued in November. Last week, market research firm Gartner forecast global chip revenue would increase 4.6 per cent to $286.5bn this year, up from its February estimate of a 3.4 per cent rise.

The SIA also said it expected chip sales to rise at a compound annual growth rate of 6.1 per cent through 2011. In November, it had forecast 7.7 per cent growth for 2007-2010.

In its mid-year update, the association said it saw slower growth for 2008 despite healthy demand for products such as mobile phones and personal computers. Soaring energy prices have dampened consumer discretionary spending, yet folks continue to snap up gadgets, flat-panel TVs and the like.

“The cost of energy is having a huge impact on discretionary spending, but people are still allocating discretionary spending to electronic devices,” SIA president George Scalise said on a webcast to discuss the forecast.

Gartner said last week it had seen no significant slowdown in the markets for digital consumer electronics and automotive products.

Yet with consumer electronics sales increasingly driving the chip industry, the SIA said it was closely watching rising food and energy costs, as well as other developments that affect personal spending.

Meanwhile, prices for DRAM memory chips, the most widely used in the PC industry, are tumbling, as they have been for more than a year. In the first four months of 2008, global DRAM revenue fell by 34 percent, even as unit shipments rose more than 40 per cent.

“DRAM is our biggest problem now in terms of driving revenue,” Scalise said.

The SIA said unit sales of PCs were on track to rise 10 per cent this year to about 300 million, and it expects mobile phone unit shipments to increase 12 per cent to more than 1.3 billion.

Excluding memory products, the SIA estimated semiconductor revenue growth at 7.4 per cent this year. Although the US economy is slowing, sales are likely to benefit from increasing demand for consumer products in growing markets such as China and India.

Revenue from sales of microprocessors, which accounts for 14 per cent of the industry total, is expected to grow more than 10 per cent annually for the next two years, the SIA said.

More than 50 per cent of semiconductors now end up in products used by consumers, Scalise said. Some 40 per cent go to the so-called enterprise market, which consists of large businesses, and the remaining 10 per cent are in government and related sectors.

Scalise said fab-capacity utilisation was healthy.

Contract chipmakers are running at almost 94 per cent of capacity, he said, while plants using the latest technology are running at almost 97 per cent.

“There’s a good balance between supply and demand at this stage,” Scalise said.

Demand for chips continues to rise, but pricing remains an issue

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