Chip industry cuts 2007 growth forecast

The Semiconductor Industry Assn. cut its forecast for the market's growth this year to 1.8% on Wednesday, citing falling prices for memory chips and microprocessors.

Sales of processors will drop 1.6% to $32.6 billion, the San Jose-based group said. Revenue from flash memory chips, used in digital cameras and music players, will be little changed, the trade association said. It had earlier forecast a 10% rise in total chip sales this year.

The SIA's revised outlook mirrors that of other forecasters, who have said that although semiconductor makers are selling more chips, too much production and competition are pulling down prices. Last month, research firm Gartner Inc. cut its growth projection for this year to 2.5%. Trade group WSTS Inc. expects a 2.3% sales gain.

"End markets continue to be strong, with consumers realizing major benefits from lower chip prices," SIA President George Scalise said. A fall in the price of processors and memory chips is "the major factor contributing to lower growth than previously projected."

The SIA expects industry sales to reach a record $252 billion this year and grow to $306 billion in 2010.
Samsung Electronics Co., the world's second-largest chip maker, and other manufacturers suffered a 33% decline in the average selling price of dynamic random access memory chips between December and April, according to the SIA. DRAM provides the main memory for personal computers.

The market for processors, the "brains" of PCs, faces increasing price competition between Intel Corp., the world's largest chip maker, and Advanced Micro Devices Inc., the SIA said. PC sales are still expected to grow 10% this year to 255 million units.

Source: Bloomberg