Semiconductor market slumps as PC sales slow, says Gartner

The economy and excess inventory are also affecting semiconductor sales negatively, analysts say.

Worldwide semiconductor sales have slowed in 2011, and the market is on pace for a small decline compared to last year, market research company Gartner said on Thursday.

Three key factors are affecting Gartner's negative short-term outlook for semiconductor sales: excess inventory, manufacturing over-capacity and slowing demand due to economic weakness.

Semiconductor sales are influenced by the production of new PCs, which has significantly decreased. Even the back-to-school season isn't expected to provide the bump in sales it usually results does. At the end of the first quarter, Gartner estimated that PC production in 2011 would grow 9.5 percent compared to last year; now it expects that growth to be just 3.4 percent, it said. That in turn has had a major effect on DRAM, sales of which Gartner now expects to decline by 26.6 percent in 2011.

The analysts at Gartner have also lowered their forecast of mobile phone production unit growth.

However, one positive development in all this doom and gloom is growing sales of smartphones and tablets, especially Apple's iPad. That has helped make NAND flash memory and data processing ASICs the fastest-growing areas in 2011, with about a 20 percent growth, according to Gartner.

The company now expects semiconductor revenue will total US$299 billion in 2011, a decline of 0.1 percent from 2010. That is down from Gartner's previous projection for 5.1 percent growth this year.

What 2012 has in store for semiconductor vendors is unclear. It is a "wild card", according to Bryan Lewis, research vice president at Gartner. The economic situation in the U.S. is raising fears that sales prospects will deteriorate further, he said.

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