Gartner lowers global chip forecast on memory doldrums

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

The market researcher now predicts 3.4 per cent chip revenue growth this year to $US278.4 billion, compared with a previous estimate of 6.2 per cent. Last year, chip revenue reached $US269.4 billion, up 2.5 per cent year-over-year.

Falling memory chip prices are to blame for most of the revision, but the market researcher also warned that global economic problems could cause further trouble for chipmakers.

The dynamic RAM (DRAM) market has been in recession since the start of 2007, Gartner said, and may not pull out until the end of the third quarter of this year. DRAM revenue is expected to fall 15 per cent this year to about $US54.9 billion, down from $US58.1 billion last year.

But the main cause of Gartner's chip revenue revision is the main storage memory chips used in iPods, iPhones and digital cameras, NAND flash. A severe oversupply in the NAND market caused chip prices to fall at the end of last year, and Gartner sees no respite in the short term. The company halved its NAND market forecast for this year to 15 per cent revenue growth.

Price declines in the NAND market may hurt the bottom line at chipmakers such as Samsung Electronics and Toshiba, but it's great for consumers. The lower pricing is already showing up in cheaper flash memory cards, and additional storage in devices, as well as price declines for some great products, such as Apple's iPod Shuffle.

Gartner cited a more cautious view of global chip demand for part of its revision, but said that shocks to the global economy had 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 Monday DQ Report.

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