Due to more severe declines in dynamic random-access memory (DRAM) average selling prices (ASPs) than previously expected, and continued price competition in the computer microprocessing unit (MPU) segment, Gartner. has lowered its 2007 worldwide semiconductor forecast to $269,2-billion, a 2,5% increase from 2006. In Gartner's previous forecast, it had predicted a 2007 revenue increase of 6,4%. 

Gartner analysts said semiconductor sales in the first quarter of 2007 were more than 5% lower than in the fourth quarter of 2006, which was worse than the expected decline that would normally be associated with a seasonal build up in inventory levels at year-end.
"Since the beginning of this year, soft semiconductor market conditions have been exacerbated by sharply declining ASPs in key device markets such as DRAM, MPU and application-specific standard products (ASSPs)," says Richard Gordon, research vice-president at Gartner. "It is likely that, despite continued unit growth in influential electronic systems markets, downward device ASP pressure will remain in place for much of 2007 as oversupplied semiconductor market conditions persist."
The memory market is forecast to decline 4,7% in 2007 primarily due to a continued weakening of DRAM ASPs. Gartner¹s latest forecast has DRAM revenue declining by 11,1% in 2007 to $30,5-billion, despite strengthening bit growth for the year. The DRAM outlook for 2008 is for a mild revenue decline, again attributed to excess capacity and continued price declines.
However, the 2008 outlook could improve if DRAM vendors adjust their current capacity plans, or if the NAND flash memory industry begins to see notably strong growth again through demand for portable video players, necessitating vendors to adjust capacity back toward NAND.
The microcomponent market is forecast to be flat in 2007 as the dominant computer microprocessor segment remains mired in fierce price competition between the leading vendors.
The forecasts for general purpose analogue IC market growth and discrete market growth have been revised downward marginally to 6,3% and 4,3% respectively in 2007 as manufacturers take time to recover from excess inventory in the first half.
Speaking of inventory, Gartner¹s analysis of companies involved throughout the supply chain suggests that the increase in overall semiconductor inventory levels observed over the past few quarters may have peaked in the first quarter of 2007 with a trend reversal expected in coming quarters.
"There are still individual sectors where Oinventory days¹ continued to rise, but in most sectors inventories have levelled or are already beginning to decline," says Gordon. "This correction is happening sooner than we expected and will have the effect of reducing annual growth prospects in 2007, but it is another indication that semiconductor manufacturers are continuing to aggressively manage output to control inventory levels."
Gartner expects the worldwide semiconductor industry to return to modest annual growth of 8,7% and 7,2% in 2008 and 2009 respectively.