Firm lowers IC forecast in mixed 2006
Mark LaPedus
(06/02/2006 2:23 PM EDT)
SAN JOSE, Calif. — While most analysts are raising their semiconductor forecasts for 2006, one investment banking firm is bucking the trend and lowering its prediction amid a sudden slowdown in IC shipments.
In a report issued on Friday (June 2), Wedbush Morgan Securities Inc. (Los Angeles) lowered its 2006 semiconductor growth forecast from 11 percent to 10 percent. For 2007, Wedbush projects that the IC market will slow and grow by only 6 percent over 2006.
The investment banking firm blamed the reduced 2006 forecast on lackluster semiconductor sales for April. Global semiconductor sales were up 8.1 percent year-to-year in April, reaching $19.6 billion, the Semiconductor Industry Association (SIA) said Thursday (June 1). Sequentially, worldwide chip sales slipped a nominal 0.4 percent from March, the SIA said.
“[We are] reducing our 2006 forecast from 11 percent to 10 percent, driven by weaker April shipments, with a muted cyclical peak still expected in mid-to-late 2006,” said Craig Berger, an analyst with Wedbush Morgan Securities, in the report.
On a month-to-month comparison, April’s actual chip shipments fell 25.8 percent, which were “worse than the 10-year median, reflecting tougher comparisons and some easing concerns about front-end and back-end chip capacity needed for holiday shipments, in our view,” Berger said.
Still, he pointed out, the sky isn’t falling in the IC industry. “Chip shipments have generally been stable and are within the 'normal' range of 7-to-10 percent annual growth,” he said.
And for the remainder of this year, the industry is expected to see a somewhat normal growth cycle despite a small glitch. “Strong demand in consumer, wireless, and emerging markets is likely to drive growth,” he said. “A healthy pricing environment now pervades many broadline analog and discrete chip suppliers, with discrete vendors likely to get sequentially higher pricing in Q2.”
Some markets are stronger than others, however. “PC processor chip sales fell 52 percent year-over-year in April, so we expect another profit warning from Intel,” said Bruce Diesen, an analyst with Handelsbanken Capital Markets, in a report. “Most other chip sales were strong in April, as expected.”
"As we have been saying since January, we believe the current MPU cycle has passed a near-term peak, making for a challenging 2H '06 ahead for both Intel and AMD,” according to Susquehanna Financial Group semiconductor analyst Kevin Vassily.
Others have a different viewpoint. The World Semiconductor Trade Statistics (WSTS) organization Tuesday (May 30) raised its semiconductor forecast.
The global semiconductor market is expected to grow 10.1 percent on an annualized basis to $250 billion in 2006, according to the spring forecast of the WSTS. Projected growth in the worldwide semiconductor market will accelerate to 11.0 percent in 2007 and 12.8 percent in 2008, according to the organization.
“We’re in a growth cycle,” said Jim Healy, president and chief executive of LogicVision Inc. (San Jose), a suppler of products for the design-for-manufacturing (DFM) market.
“The growth cycle is driven by digital consumer products,” he said. “Computer products are growing again. Cell phones continue to grow. And the amount of new designs is increasing.”
Still, it’s a mixed bag, especially for memories. Contract prices for 4-Gbit NAND flash parts recently jumped by 12 percent “due to the fact that Sony and Apple are negotiating the second half production plan with Samsung,” according to ACL Semiconductors Inc., a Hong Kong-based chip distributor.
Vendors are moving towards 8- and 16-Gbit NAND parts, leaving 4-Gbit chips in tight supply, according to the distributor.
There is expected to be a slight oversupply of NAND-based flash memories in the marketplace for 2006, although supply is projected to become tight in the second half of this year, according to one analyst.
DDR DRAMs are in “tight supply and the relative shortage of the DDR could last into the summer months as most manufacturers have switched their production lines to DDRII,” according to ACL. “DDRII prices are quite stable recently and we anticipate we will see even more market activity in June.”
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