A major factor behind revised outlook is improving DRAM market,
which will account for more than 10 per cent of worldwide semiconductor revenue.

Improving conditions in the memory market have cast a more positive light on the semiconductor industry’s outlook for 2006, prompting iSuppli Corp to upgrade its chip revenue forecast mildly for this year.

Worldwide semiconductor revenue will grow to US$254.7 billion in 2006, up 7.4 per cent from US$237.1 billion in 2005, iSuppli predicts.

iSuppli’s previous forecast, issued in January, called for a 6.8 per cent increase in global semiconductor revenue in 2006.

The major factor behind iSuppli’s revised outlook is the improving condition of the DRAM market, which will account for more than 10 per cent of worldwide semiconductor revenue in 2006.

In contrast to 2005, when DRAM revenue contracted by 6.2 per cent, sales in this area will rise by a corresponding 6.2 per cent in 2006, growing to US$26.4 billion, up from US$24.8 billion in 2005.

Accelerating growth in bit production, and slowing declines in average selling prices (ASPs) compared with 2005 will help the market to expand in 2006.

While revenue growth in the second-largest segment of the memory business, NAND flash, will decelerate in 2006, it will still generate a healthy increase, growing to US$13.8 billion, up 29percent from 2005.

In contrast, NAND revenue rose by 62percent in 2005.With growth of 3.6 per cent in 2005, and 7.4percent in 2006, the semiconductor market is experiencing a ‘double bottom’, where during a period of two years growth is lagging the overall semiconductor compound annual growth rate (CAGR) of 8.2percent from 2005 to 2010, according to Gary Grandbois, principal analyst for iSuppli.

“It had been debated for some time whether 2005 or 2006 would be the bottom year in the downside of the silicon cycle; in fact, it appears that both 2005 and 2006 will represent an extended two-year period of moderate growth before the market returns to double-digit growth in 2007,”  Grandbois said.

iSuppli forecasts worldwide semiconductor revenue will rise to US$285.2 billion in 2007, up nearly 12percent from 2006.

Despite the rise in semiconductor revenue in 2006, the growth rate for sales of electronic equipment that uses chips will slow compared to 2005. Worldwide electronic equipment revenue will rise 5.9 per cent in 2006, compared to 7.8 per cent in 2005.

No major segment within the electronics equipment industry in 2006 will achieve double-digit revenue growth, in contrast to 2005, when consumer-electronics was the lone equipment area to rise by 10 per cent or more.

The biggest slowdowns in 2007 will come in the consumer electronics and wireless equipment segments.

Revenue in the worldwide consumer-electronics equipment market will rise by 6.7 per cent in 2006, down markedly from 13.1 per cent in 2005. Other factors, including economic issues, high household penetration rates, lengthening consumer replacement cycles and the convergence of different pieces of equipment, are slowing consumer-electronics sales increases.

Meanwhile, reduced growth in unit shipments of mobile phones will cause wireless communications equipment revenue growth to slow to less than 1percent in 2006, down from 6.4percent in 2005.

Electronic equipment revenue growth will accelerate in 2007 to 7.1 per cent, with wired communications, wireless communications, consumer electronics, automotive and industrial gear all generating increased revenue growth compared to 2006. 

For more information, visit www.isuppli.com