Semiconductor market looks good – Gartner

“Finally the chip market is starting to hum. Now is not the time to cut back on the 2008 forecast”, says Malcolm Penn, CEO of the leading European analysts Future Horizons, having a dig at many analysts who have been cutting back their forecasts in light of world economic conditions.

“It was widely assumed that the slowdown in the US economy that began in mid-2007 would reduce demand for electronics goods and, by extension, semiconductors in 2008,” says Richard Gordon, research vice president at Gartner Dataquest, “however, while we are still forecasting low single-digit growth for the semiconductor market in 2008, this has more to do with supply-side factors than weakness in demand.”

Future Horizons is forecasting 12 per cent growth this year. Gartner Dataquest is forecasting 4.6 per cent growth which has been increased from its 3.4 per cent growth forecast made in February.

Both analyst companies are pretty close on what the market will be worth this year, Future Horizons saying $287bn and Gartner saying $286.5bn.

“March’s sale figures romped home with a vengeance – reversing February’s lacklustre performance – with IC sales up 10.8 percent on February and 8.2 percent on the same time last year”, says Future Horizons’ Penn, “more importantly, ASPs were up 13.3 per cent on February and 2.1 per cent on March 2007.”

“Guidance from electronics and semiconductor vendors about the forecast level of sales in the second quarter of 2008 suggests that they are not expecting market conditions to worsen,” said Garner’s Gordon, “however, a leading indicator we are concerned about is the level of semiconductor supply chain inventory, which has increased in the past three quarters. If this trend does not show signs of reversal in the second quarter of 2008, then it may be a sign that demand is faltering.”

Future Horizons points out that February’s IC unit growth was down 5.9 per cent versus January, offset by a 4.2 percent growth in ASPs, with the net result a 1.9 percent value decline, a performance which dramatically slowed the industry growth momentum and which, if translated into an underlying trend, would decimate 2008’s growth.

‘March’s results saw monthly IC sales soar by 10.8 per cent on a 5-week month adjusted basis,’ writes Future Horizons, ‘significantly reversing February’s doom and gloom, driven by a 2.2 per cent decline in units but a 13.3 per cent increase in ASP.

‘The net result was an overall quarterly value decline of 5.9 per cent versus Q4-2007, driven by a 5.2 per cent decline in units and a 0.7 per cent decline in ASPs. The corresponding numbers for Q1-2007 were a quarterly decline of 6.9 per cent in value driven by 0.8 per cent decline in units and a 6.2 percent decline in ASPs. The key point here is, not the apparent slowing in IC unit demand but the significant slowing in ASP decline. The fact that ASPs were essentially flat on Q4 is a clear vindication of our belief that the IC ASP trend has finally stopped falling.’

Gartner took the view that: ‘In the first quarter of 2008, global sales of semiconductors were seasonally normal, buoyed by healthy PC and cell phone unit production. There have been no signs of a significant slowdown in the markets for digital consumer electronics products and automotive electronics, demand for which could be expected to be affected by cutbacks in discretionary spending by consumers’.