Mid-year check on the semiconductor industry

by Jeff Dorsch, July 3rd, 2008, 7:00 am

The semiconductor industry — how’s it doing this year? Not bad, actually, if you’re not in the DRAM or flash memory device business.

In the Semiconductor Industry Association’s mid-year update, there was good news and bad news. You want the bad news first? OK, the bad news is the US-based trade group lowered its growth forecast for 2008, from 7.7% to 4.3%. The good news? Take out the memory products market, and the industry will grow 7.4% this year, according to the SIA.

IC Insights, a market research firm, also downgraded its forecast for 2008. It sees sales volume increasing by 7%, instead of an earlier estimate of 9%, and unit volume growing by 8%, rather than 11%.

It’s been a bummer of a year for chip makers that are heavily dependent on the DRAM or flash memory business. There still is tremendous oversupply in those markets, depressing memory prices. Qimonda (the memory products spinoff of Infineon Technologies) is suffering and cutting headcount, as is Spansion. Micron Technology is seeing tough times, too. Samsung Electronics, the world’s biggest supplier of memory devices, is a more diversified chip maker and not hurting as much. Most companies in the business are scrapping over market share.

What’s selling? Microprocessors, analog semiconductors, and logic devices, the SIA reported. Analog chips and MPUs each make up about 14% of the worldwide semiconductor market, and the SIA forecasts healthy growth for both segments in the next couple of years.

SIA president George Scalise said in a statement, “Sales of personal computers, the largest single market for semiconductors, continue to be strong, especially in emerging markets. Total unit sales of PCs are on pace to grow by 10% this year to around 300 million units. Cell phone unit shipments are expected to grow by about 12% to more than 1.3 billion units, with the largest growth coming from China, India, and other emerging markets.”

The SIA’s rosy take on the PC market is echoed by two market research firms, Gartner and IDC Research. Gartner recently bumped up its 2008 forecast for worldwide PC shipments, to 15.2% from an earlier forecast of 12.8% growth over 2007. IDC Research was a little less optimistic but nonetheless similarly inclined to see the glass filling with more water; it now calls for 12.5% growth in the PC market for 2008, up from a prior estimate of 10.9%.

And the trend is toward smaller, more portable computers. Laptops, notebooks, and smaller portables will increase sales by about 34% this year, according to IDC, while sales of desktop computers will grow only around 5%. The functionality of smart phones, principally the BlackBerry and the iPhone, will continue to increase to the point that there will be little difference in applications, price, and size between them and the smallest computers.