Another chip forecast drops
as price erosion spreads
By J. Robert Lineback
PHOENIX--Chronic overcapacity, fierce pricing competition
and widespread uncertainty in the semiconductor industry
continue to dampen revenue growth prospects in worldwide
markets, according to Semico Research here, which has revised
its forecast downward showing chip sales falling 1% in 1998.
Last year, semiconductor revenues staged an anemic recovery,
growing about 4% to $137 billion, after dropping 9% in 1996.
"Pricing pressure has now overflowed into many other product
categories like programmable logic, standard cells,
microprocessors, microcontrollers as well as
microperipherals," warned analyst Jim Feldhan, president of
the Phoenix-based market research and consulting firm.
In addition to lowering its revenue forecast, Semico has
adjusted downward its prediction of semiconductor unit
shipments to a 1.0% increase this year. The research firm now
expects 256 billion ICs and discrete semiconductors to be
shipped in 1998 compared to its previous forecast of 2.1%
growth (or 259 billion units), which was issued last
November.
Other market research firms have also lowered their forecasts
citing price erosion, a glut of production capacity--especially in
memories--and continued weakness in Japan's economy. On
Wednesday, the Semiconductor Industry Association (SIA)
plans to release its mid-year forecast, based on recently revised
numbers from the World Semiconductor Trade Statistics
(WSTS) organization. A spokesman for the SIA hinted that the
revised numbers will in line with recently lowered forecasts by
industry analysts.
Low average selling prices (ASPs) remains the chip industry's
biggest problem, according to Semico. "The industry continues
to experience extreme pricing pressure on memory, and as the
cost per megabit declines, the bit growth rate will show about
90% for 1998," Feldhan said. "Micro logic will experience a
dollar growth of 6% as we continue to see a shift to lower cost
PCs and lower prices for microcontrollers and
microperipherals."
Semico said PC demand remains strong, and microprocessor
unit shipments have tracked closely to the company's
projections, but competitive conditions have kept processor
ASPs low. |
