upgrade for 2006 semiconductor forecast

Paul Boughton

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 2006prompting iSuppli Corp to upgrade its chip revenue forecast mildly for this year.

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

iSuppli’s previous forecastissued in Januarycalled 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 marketwhich will account for more than 10 per cent of worldwide semiconductor revenue in 2006.

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

Accelerating growth in bit productionand 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 businessNAND flashwill decelerate in 2006it will still generate a healthy increasegrowing to US$13.8 billionup 29percent from 2005.

In contrastNAND revenue rose by 62percent in 2005.With growth of 3.6 per cent in 2005and 7.4percent in 2006the 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 2010according to Gary Grandboisprincipal 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 factit 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 2007up nearly 12percent from 2006.

Despite the rise in semiconductor revenue in 2006the 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 2006compared to 7.8 per cent in 2005.

No major segment within the electronics equipment industry in 2006 will achieve double-digit revenue growthin contrast to 2005when 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 2006down markedly from 13.1 per cent in 2005. Other factorsincluding economic issueshigh household penetration rateslengthening consumer replacement cycles and the convergence of different pieces of equipmentare slowing consumer-electronics sales increases.

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

Electronic equipment revenue growth will accelerate in 2007 to 7.1 per centwith wired communicationswireless communicationsconsumer electronicsautomotive and industrial gear all generating increased revenue growth compared to 2006. 

For more informationvisit www.isuppli.com

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