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Gartner lowers chip revenue forecasts

Pressure from falling memory prices and the global economic slowdown has caused the analyst to almost half its predicted revenue for the chip industry in 2008.

By Miya Knights, 3 Mar 2008 at 12:41

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Gartner has chopped nearly half of the value of revenue growth predicted for the global semiconductor market in 2008.

In the middle of last month it warned it might revise its original, 6.2 per cent forecast in annual chip revenue growth. At the time, analyst Richard Gordon said that this was "because slightly weaker global demand will only compound an already oversupplied market."

The analyst firm today said it now predicts growth this year to $278.4 billion (£140.3 billion) or 3.4 per cent instead. This is compared to 2007 revenues of $269.4 billion (£135.8 billion), which were up 2.5 per cent year-on-year.

It said falling memory chip prices were mainly to blame for the slowdown in revenue, but it also warned manufacturers that tougher economic conditions could add to their troubles.

"We are not discounting the possibility that the demand side of the semiconductor industry could get (much) worse, which could cause a contraction in the market this year," said Gartner in its Semiconductor Monday DQ Report.

It halved its forecast growth for chips that supply the NAND flash market used in digital cameras, iPods and other portable digital devices to 15 per cent, adding that oversupply in this particular area toward the end of last year "sees no respite in the short term." It added that while this may hurt consumer chipmakers like Toshiba and Samsung, it would be good news for consumers in terms of lower price or higher storage capacity devices.

The online memory marketplace DRAMeXchange Technology confirmed Gartner's predictions, showing the price of mainstream 4Gbit NAND flash chips falling 26 per cent already in 2008 to $4.48 today. And the cost of a 2G byte secure digital (SD) card fell to $7 from $9.26 in December 2007.

Gartner added that the dynamic random access memory (DRAM) market has also been in recession for almost a year now, with revenue actually expected to fall 15 per cent to $54.9 billion (£26.7 billion), compared to $58.1 billion (£29.3 billion) last year. It said any upturn would not be likely until the third quarter of this year.