Global semiconductor sales to reach US$255.7 billion in 2006, says iSuppli
Press release, October 12; Rodney Chan, DigiTimes.com [Thursday 12 October 2006]
With no signs of a major drop-off in semiconductor demand this year, iSuppli predicts global semiconductor sales will rise to US$255.7 billion in 2006, up 7.8% from US$237.2 billion in 2005. The previous forecast by iSuppli in June predicted global semiconductor sales would grow by 7.9% in 2006.
"The PC and mobile-phone markets, the major drivers of semiconductor sales during the past two years, have remained healthy in 2006," said Gary Grandbois, principal analyst with iSuppli.
The data-processing equipment segment, dominated by PCs, will experience global revenue growth of 7.3% in 2006, iSuppli predicts. Meanwhile, the wireless communications gear area, which is heavily influenced by handsets, is expected to achieve revenue expansion of 5.2% for the year.
The PC market has shown some signs of slowing in 2006, prompting iSuppli to trim its growth forecast for the year compared to its previous prediction of a 9.3% increase. Although average selling prices (ASPs) for handsets are falling rapidly, strong unit demand has prompted iSuppli to raise its 2006 wireless communications growth forecast from 4.6% previously.
"Regardless of these alterations to the forecast, both the PC and mobile-phone areas are maintaining their momentum in 2006, keeping semiconductor shipments at a higher level than during the second half of 2005," Grandbois noted. "Semiconductor revenue in the second half of 2006 is expected to be 6.4% higher than during the same period in 2005."
Higher energy prices in the third quarter began to impact the semiconductor market to a degree - briefly stunting growth in chip sales. This will result in a slower than usual second half for the semiconductor market, with chip sales rising by only 6.7%, compared to the first half of 2006. This is the lowest rate of second-half growth since 2001, and it is less than the long-term average of 8% sequential growth for the last six months of the year.
Some economists expressed concern, in the third quarter, that high energy prices would hurt consumer spending, possibly sending the US economy into recession. However, the recent sudden drop in oil prices has mitigated the impact of high energy prices and has brightened the outlook for the fourth quarter. The research firm is not anticipating a recession in the U.S. economy.
Concerns have been raised that the recent increase in excess semiconductor inventory could bring about a repeat of market conditions that occurred in 2004, when customers responded to a dramatic rise in surplus chip stockpiles by sending back shipments and cancelling orders when second-half demand failed to materialize.
However, conditions in 2006 are markedly different from those in 2004. Two years ago, inventory build-up, and order changes, cancellations and push-backs were broad based across most segments of the electronics industry. In 2006, the bulk of inventory excess has been due to new product launches and market-share battles in the microprocessor and PC core-logic chipset areas, with the majority of this surplus concentrated at one supplier: Intel.
While some signs show an inventory glut has spread to other segments of the electronics industry, there are few indications that it is having a significant impact on chip sales.
While iSuppli's overall semiconductor growth forecast has remained stable, there are a number of changes to the underlying factors driving the market, most notably in the memory area.
DRAM revenue growth is shaping up to be stronger than expected in 2006, with the per-megabit ASP for the memory declining by only 16% this year, a significant slowdown from 40% in 2005. Because of this, worldwide DRAM revenue growth will accelerate to 24% in 2006, up from iSuppli's previous forecast of 8%.
The upgrade in the DRAM forecast is accompanied by a downgrade of the NAND-flash memory outlook. A 60% decline in ASPs will blunt the impact of strong unit growth in NAND flash, resulting in revenue growth of only 17% for the year. The research firm had previously forecast 37.2% revenue growth for NAND in 2006.
Other changes include a reduction in the microprocessor forecast and minor tweaks to outlooks for other applications.
Thus, with a combination of increased growth in DRAM, a decreased expansion for NAND flash, a reduction in the microprocessor forecast and only modest alterations in the other device outlooks, iSuppli's 2006 semiconductor forecast has seen little change in total.
The research firm predicts that revenue from shipments of electronic equipment will rise by 5.1% in 2006, down from the previous forecast of 6.8%. This represents a significant decline from 8% growth in 2005.
This decline is largely due to the softening consumer-electronics market, which is expected to drop from 13% revenue growth in 2005 to less than a 3% increase in 2006. The slowing is mainly due to many of the hottest consumer electronics products now having settled into a stage of declining ASPs and slowing growth.
The impact of this slowing on the semiconductor market has been mitigated by improvements in the DRAM market.
The research firm has also slightly reduced its 2007 semiconductor forecast but is maintaining its present outlook for 2007 as a peak year of the present cycle.
Global semiconductor sales are now expected to rise by 10% in 2007, compared to iSuppli's previous forecast of 12.4% growth. Global chip revenue is predicted to rise by 8.8% in 2008, before slowing to 2.6% growth in 2009. An annual decline in semiconductor revenue is not expected, at least through 2010.
Worldwide semiconductor revenue and annual revenue growth (million US$)
2005
2006
2007
2008
2009
2010
Revenue
237,167
255,743
281,270
305,886
313,697
339,380
Annual growth
3.6%
7.8%
10.0%
8.8%
2.6%
8.2%
Source: iSuppli |
