2006 semiconductor forecast revised

Paul Boughton

After a better-than-expected first quarter, iSuppli Corp has upgraded its semiconductor forecast slightly for 2006.

In the newly issued forecast, iSuppli’s expected growth for 2006 has inched upward by a half-per centage point, going to 7.9 per cent, up from 7.4 per cent previously. Worldwide semiconductor revenue will rise to $255.7 billion in 2006, up from $237 billion in 2005, iSuppli predicts.

“The rise in the 2006 semiconductor revenue outlook comes despite a slowdown in the markets for electronic equipment,” said Gary Grandbois, principal analyst with iSuppli Corp. “Worldwide electronic equipment revenue growth will decline to 6.8 per cent in 2006, down from 8.2 percent in 2005.

“However, electronic equipment demand remains very strong, and continues to be driven by the healthy PC, mobile- phone and consumer-electronics markets. Furthermore, improving conditions in the semiconductor industry, bolstered by rising Average Selling Prices (ASPs) and lengthening lead times, are propelling chip growth to a higher level than that experienced by the end-equipment markets.”

Two major product families are behind the semiconductor market’s growth in 2006: analog and memory ICs. Standard linear analog ICs are experiencing a very strong resurgence because prices are being pushed up by suppliers in order to pass on increases in material costs. A healthy mobile-phone market, which is expected to post nearly 14 per cent unit growth in 2006, also is important to the growth of analog ICs.

Memory IC growth is being led by the continuing strength of flash, an area that is expected to expand by 27 per cent in 2006. Flash memory growth, combined with the 8 per cent rise in DRAM revenue expected in 2006, will generate total memory IC growth of nearly 15 per cent for the year.

However, the semiconductor market outlook for 2006 isn’t all rosy. The higher-than-expected growth seen in the first quarter will be followed by some sluggishness in the market in the second half. Second-half growth of 5 per cent is less than normal seasonal expectations.
Orders appear to be weakening and inventories are rising.

The iSuppli forecast update is only a modest revision because the market outlook, while positive, remains somewhat tentative for the rest of 2006.

For more information, visit www.isuppli.com