It’s been a rough first half for manufacturers of semiconductors and other electronic components. The rosy forecasts for 2007 have borne mixed results.
In the consumer electronics market, Nintendo has enjoyed better-than-expected sales of its Wii game console, while Sony’s PlayStation 3 hasn’t met expectations. (There have been some months when the much cheaper PlayStation 2 has outsold the PS3, measured by unit volume.) People are gearing up (and some may be lining up!) for the debut of the Apple iPhone. At the same time, LG Electronics and Samsung Electronics are getting a gut-check; their newest wireless handsets, their “iPhone killers,” may be barred from sale in the US if they contain chipsets from QUALCOMM, under a recent patent ruling by the US International Trade Commission.
It hasn’t been a barn-burner of a year for PC sales; it’s been good for Hewlett-Packard, not so good for Dell. Lackluster sales of cell phones have also dampened financial results at Motorola and Nokia. As the big electronics manufacturers stumble or fall, chip makers take a full face plant. Many have guided down expectations for their Q2 results, and some component manufacturers — such as Molex — are ready to hand out pink slips.
Two key markets, DRAMs and NAND flash memories, have performed to expectations for 2007, to the extreme. Memory chip makers have sold a lot of parts this year, but spot prices have collapsed so rapidly that the situation is dragging down the entire semiconductor industry’s growth for 2007. (Long-term supply contracts, with locked-in pricing, have kept memory prices from completely collapsing, though, and the latest pricing trends are upward.) The Semiconductor Industry Association recently cut its 2007 forecast, from a 10% increase to growth of less than 2% for the entire year, due to falling prices on microprocessors (the AMD-Intel pricing war), DRAMs, and NAND flash.
As Roseanne Roseannadanna could say of the chip business: Well, Jane, it just goes to show you; it’s always something!
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