Letting the chips fall where they may

by Jeff Dorsch, December 21st, 2006, 7:00 am

Will it be a year of “que sera, sera” for the semiconductor industry in 2007? Not likely.

The chip business is settling into a period of mature, smooth growth. It’s too soon to say the boom-or-bust days are over for good, but the recent trend is for steady growth of about 10% a year. Worldwide sales reached nearly $250 billion in 2006, and some forecasters see the market climbing to $275 billion in 2007 and $300 billion in 2008.

That last figure is significant, since the market topped $100 billion for the first time in 1994 and popped over $200 billion in 2000, before dramatically plunging in 2001-2003 and reaching $200 billion again in 2004.

What will be the hot microchip markets in 2007?

Look for flash memory to be a volatile niche (that’s a little inside joke for my EE peeps, since flash is a non-volatile memory device). Flash memory is in all the hot consumer electronics products, from the iPod to camera phones to game consoles. Its widespread demand has set off construction projects all over the globe, which has led to predictions that there will be a supply glut and crashing prices in – you pick it – Q1, Q2, Q3, or Q4 of the new year.

Flash is the new DRAM, so to speak; it doesn’t functionally replace dynamic random-access memory in electronics design, yet it’s become the hot commodity product in the memory device market. The big-pimpin’ playas in flash include Intel, Micron Technology, Samsung Electronics, Spansion, STMicroelectronics, and Toshiba.

Meanwhile, DRAM is enjoying its own renaissance, with increasing sales volume if not higher unit prices. The “big 4” DRAM suppliers – Hynix Semiconductor, Micron, Qimonda, and Samsung – may not get big boosts in 2007, but the second-tier players are gunning for market share. Elpida Memory (#5 in DRAM) has joined with seventh-ranked Powerchip Semiconductor in an ambitious, $15 billion program to build four new DRAM plants in Taiwan, the first of which will come online in 2007.