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Semiconductor Industry Association Forecasts Slower Growth

June 15, 2007

The association expects sales will grow by only 1.8% in 2007, as a result of declining prices in key market segments.


SAN JOSE, CA /BUSINESS WIRE/ -- Sharp declines in average selling prices (ASPs) for microchips in several key market segments—microprocessors, DRAMs, and NAND flash—will contribute to slower growth in worldwide sales of semiconductors in 2007, the Semiconductor Industry Association (SIA) said. SIA lowered its forecast for 2007 global microchip sales growth from 10% to 1.8%, despite solid fundamentals and continued strong unit growth in major end markets. The new SIA forecast projects total sales of $252 billion in 2007, rising to $306 billion in 2010.

"Despite strong unit demand for semiconductors, driven by healthy growth in major end markets, worldwide microchip sales will not reach our earlier forecast of 10% growth in 2007," said SIA President George Scalise. "We now expect that total sales will grow by 1.8% to $252 billion in 2007, with further growth to $306 billion in 2010. The new forecast projects a 5.4% compound annual growth rate for year end 2006 through 2010. Rapid price attrition in three key market segments—microprocessors, DRAMs, and NAND flash memories—is the major factor contributing to lower growth than previously projected."

The SIA noted that end markets that drive sales of these products—personal computers, cell phones, MP3/personal media player (PMP) devices, and other consumer products, such as digital TVs and digital cameras—continue to be in line with previous forecasts. "PC sales are on track to reach 10% unit growth in 2007, reaching approximately 255 million units," said Scalise. "PCs continue to be the largest single end market for semiconductors. Despite strong unit PC sales growth, we expect that total sales of microprocessors will decline by 1.6% as intense competition is contributing to price erosion at a more rapid pace than historical patterns.

"DRAMs continue to be under significant price pressure, with the result that we now expect total sales to grow by 2.0% in 2007," Scalise continued. "Average selling prices in April of 2007 were down by approximately 33% compared to December of 2006. Inventory issues in this segment will affect ASPs going forward, and the current forecast assumes continued degradation of prices."

Growth in the handset market has slowed somewhat, with unit growth of around 10% currently projected for 2007. Scalise noted that a 10% growth rate translates to an additional 100 million units in 2007. "Mature markets are now buying 3G phones with higher chip content than older units," Scalise said.

Other consumer products continue to experience very strong unit growth. "Sales of PMPs and MP3 players are expected to grow by more than 20% this year to more than 215 million units, driving unit demand for flash memory," said Scalise. "Despite strong unit growth in important demand drivers for NAND flash, this market segment is experiencing price attrition in a very competitive environment. According to the World Semiconductor Trade Statistics organization, ASPs for NAND flash declined by more than 35% year-on-year in April, even as unit shipments grew nearly 54%."

Most other market segments—discrete products, optoelectronic devices, sensors, analog chips, and MOS micro—will see growth in line with the overall industry forecast. MOS logic devices are expected to grow by 5.7% in 2007.

Capacity utilization remains strong, especially for 300 mm wafer fabrication facilities. Total industry capital spending is now projected to be in the range of 20%–22% of industry sales, a rate that should not lead to excess capacity.

"End markets continue to be strong, with consumers realizing major benefits from lower chip prices, coupled with ever-increasing performance and functionality from advances in chip technology. Despite a forecast of slower growth, we expect that global sales of microchips will surpass last year's record level," Scalise concluded.

SIA Growth Forecast for Major Semiconductor Product Lines

 2007
Sales
2007
Growth
CAGR through 2010
(from 2006 actual $)
Discrete$17.12.9%4.3%
Opto$16.51.3%5.7%
Analog$37.00.1%5.9%
MOS Micro$54.20.5%5.6%
MPU$32.6-1.6%4.9%
MOS Logic$63.65.7%6.6%
Memory$58.3-0.3%3.5%
DRAM$34.52.0%4.5%
Total IC$213.01.7%5.5%
Total Semiconductor$252.11.8%5.4%
Total Semiconductor
Less Memory
$193.92.4%6.0%

About the SIA
The SIA is the leading voice for the semiconductor industry and has represented U.S. semiconductor companies since 1977. Collectively, the chip industry employs a domestic workforce of 232,000 people. More information about the SIA can be found on the association's Web site.


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