The market research firm lowered its prediction to $269.2 billion, a 2.5% increase over 2006. Gartner had previously forecast a revenue increase of 6.4%.
Semiconductor sales overall in the first quarter of this year were more than 5% lower than in the fourth quarter of last year, which was worse than the expected decline normally associated with a seasonal buildup in inventory levels at the end of the year, Gartner said.
"Since the beginning of this year, soft semiconductor market conditions have been exacerbated by sharply declining ASPs [average selling prices] in key device markets such as DRAM, MPU [microprocessing units], and application-specific standard products," Gartner analyst Richard Gordon said in a statement. "It is likely that, despite continued unit growth in influential electronic systems markets, downward device ASP pressure will remain in place for much of 2007 as oversupplied semiconductor market conditions persist."
The memory market in general is expected to drop 4.7% this year, primarily because of lower DRAM average selling prices, Gartner said. DRAM revenue is expected to fall 11.1% this year to $30.5 billion. A mild revenue decline for DRAM is expected next year because of excess capacity and continued price drops.
The 2008 outlook, however, could improve if DRAM vendors adjust current capacity plans, or if the NAND flash-memory industry sees strong growth again through demand for portable video players.
The micro-component market is expected to be flat this year, as the dominant microprocessor segment remains mired in fierce price competition between leading vendors, Gartner said.
Gartner expects the worldwide semiconductor industry to return to modest annual growth of 8.7% and 7.2% in 2008 and 2009, respectively.