iSuppli Cuts Semiconductor Revenue Forecast

Market researcher iSuppli is estimating a lower 2007 revenue forecast for the semiconductor industry, due in part to plunging prices for memory chips.

Global revenue is expected to increase 6% to $276.6 billion this year from $260.9 billion last year, the firm said. ISuppli in April had predicted an 8.1% jump.

The latest projection remained well above the roughly 2% increase predicted by other researchers, reflecting a general optimism on the part of iSuppli. Nevertheless, weaker-than-expected conditions in the first quarter made the correction necessary, the firm said.

Those conditions included plunging prices for memory chips combined with a significant inventory correction that resulted in a 6.2% revenue decline from the fourth quarter. While both events were expected, iSuppli had forecast only a 5.4% decline in revenue in the quarter.

Nevertheless, iSuppli believes the market is "fundamentally sound," iSuppli analyst Gary Grandbois said in a statement. PC and handset unit growth is expected to exceed 10% this year, while the electronic equipment market is expected to rise by 6%. Further boosting the semiconductor market is an expected slowdown in price erosion in the second half of the year

"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."

ISuppli predicted the market would grow by 8.8% next year, dropping to 2.7% in 2009 because of a combination of weakening markets, overcapacity, and price erosion.