Gartner lowers semiconductor forecast

Gartner has lowered its 2008 global semiconductor forecast, citing falling memory chip prices and a weakening global economy.

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Gartner has lowered its 2008 global semiconductor forecast, as memory chip prices fall and the global economy weakens.

The market researcher now predicts 3.4 percent chip revenue growth this year to US$278.4 billion (£139.8 billion), compared to a previous estimate of 6.2 percent. Last year, chip revenue reached $269.4 billion (£135.3 million), up 2.5 percent year-over-year.

The main cause of Gartner's downwards revision is a severe oversupply of the main storage memory chips used in iPods, iPhones and digital cameras – NAND flash. This caused chip prices generally to fall at the end of last year, and Gartner "sees no respite in the short term".

Indeed, DRAMeXchange Technology, which runs an online memory chip market, has confirmed that the price of mainstream 4GB NAND flash chips has fallen 26 percent so far this year to $4.48 (£2.25). Flash memory card prices have also declined. For example, the price of a 2GB SD (secure digital) card fell to $7 (£3.51) Monday, from $9.26 (£4.64) at the end of 2007, according to DRAMeXchange.

While all of this is great news for consumers – even driving down the price of Apple's 2GB iPod Shuffle to $69 (£34.62) – declines in the NAND flash market may hurt chip makers such as Samsung Electronics and Toshiba. Gartner has halved its NAND market forecast for this year to 15 percent revenue growth.

Meanwhile, the market researcher has also warned that global economic problems could cause further trouble for chip makers.

The DRAM (dynamic RAM) market has been in recession since the start of 2007, Gartner said, and may not pull out until the fourth quarter of this year. DRAM revenue is expected to fall 15 percent this year to around $54.9 billion, from $58.1 billion last year.

Gartner cited a more cautious view of global chip demand for part of its revision, but said that shocks to the global economy have so far not caused problems in chip revenue. That could change should further housing and credit industry problems cause consumers to rein in spending, the market researcher warned.

"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," Gartner said in its semiconductor report.

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