iSuppli Lowers Semi Revenue Forecast

iSuppli Corp. lowered its semiconductor revenue growth forecast to 3.5 from a previous prediction of 6 percent. The market is now exprected to grow to about $270 billion from about $261 billion in 2006. Ironically, the downward revision comes at a time when chip revenue is up, the memory industry is improving, and electronic equipment markets are on the upswing. Though conditions are stronger for chip revenue, the memory industry and electronic equipment, they won's be able to offset the impact of the first half's weakness, iSuppli says. "The major cause of the first-half semiconductor industry weakness was a 13 percent sequential decline in revenue during the period for memory Integrated Circuits (ICs), led by DRAM and NAND-type flash," Gary Grandbois, principal analyst with iSuppli, said in a statement. "The memory revenue decline was spurred by a drop in Average Selling Prices (ASPs), which in turn was caused by a glut of parts on the market." The second half revival is being prompted not only by the normal year-end seasonal strength, but also by am surge in memory chip prices and a stronger end-equipment market. Memory chip revenue is expected to rise by 15 percent as the holiday season brings stronger PC sales. Since memory accounts for about 23 percent of total semiconductor revenue in 2007, iSuppli says, this will have a major impact on the overall chip market. DRAM suppliers' oversupply prompted the decline in memory prices, but they've since slowed production and have stablized prices, creating a stronger market than in the first half. The NAND flash market recovery has been more dramatic in the third quarter. iSuppli forecasts NAND prices will increase in the third quarter, contrasting the 40 percent decline in per-megabyte prices in the first quarter. Revenue fell over 20 percent in the first quarter, but the NAND market partially recovered with a 15 percent rise in the second quarter. The third quarter has brought an estimated 37.5 percent rise, iSuppli says. Overall, the DRAM and NAND markets are expected to grow by 2.5 percent and 15 percent respectively this year. Due to this growth, iSuppli predicts the semiconductor market will achieve a 9.3 percent revenue expansion next year. Though the 2007 semiconductor forecast has declined, the outlook for shipments of electronic equipment using those semiconductors has improved, according to iSuppli. Electronic equipment revenue growth is expected to grow about 7 percent this year, up from previous predictions of 6 percent. Of the six major electronic equipment segments, five of them (data processing, wireless communications, wired communications, consumer electronics and automotive) have been upgraded by iSuppli. Industrial equipment has not.