The poor performing first half of 2007, fuelled by memory over-capacity and competitive pricing pressure in most markets, has meant that iSuppli Corp. has now cut its full year revenue forecast for the industry by almost half. The market research firm is now projecting only 3.5 percent revenue growth in 2007, down from its June adjusted forecast of 6 percent. 

Global semiconductor revenue is now expected to rise to $269.9 billion in 2007, up 3.5 percent from $260.6 billion in 2006. In 2008, the total semiconductor market is expected to achieve a 9.3 percent revenue expansion.

“The major cause of the first-half semiconductor industry weakness was a 13 percent sequential decline in revenue during the period for memory Integrated Circuits (ICs), led by DRAM and NAND-type flash,” said Gary Grandbois, Principal Analyst with iSuppli. “The memory revenue decline was spurred by a drop in Average Selling Prices (ASPs), which in turn was caused by a glut of parts on the market.”
 
Semiconductor revenue will rise by 9.8 percent sequentially in the third quarter and by 4 percent in the fourth.

Memory IC revenue growth is now expected to reach 15 percent in the second half compared to the first as ASP erosion is muted by seasonal demand, iSuppli said. After declining by 10 percent and 23.8 percent sequentially in the first and second quarters of 2007 respectively, DRAM revenue will rise at a hefty 20.8 percent rate in the third quarter and will remain flat with a marginal 0.2 percent decline in the fourth quarter.
 
The NAND flash market recovered in the third quarter with prices expected to increase in the third quarter. This is in contrast to the 40 percent decline in per-megabyte prices in the first quarter. Revenues in the third quarter are expected to rise by 37.5 percent, which will be followed by a modest 6.5 percent increase in the fourth quarter.

Due to stable pricing conditions in the second half, the DRAM and NAND markets are expected to grow by 2.5 percent and 15 percent this year, respectively.