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Excess inventory, manufacturing overcapacity and slowing demand are expected to hit semiconductor sales in 2011, according to market research firm, Gartner. Worldwide semiconductor revenue was said to have slowed and the market is set to decline by 0.1% on revenue of US$299 billion in Gartner’s revised 2011 forecast. Previously, Gartner had expected the industry to grow by 5.1% in 2011.

"Three key factors are shaping the short-term outlook: excess inventory, manufacturing overcapacity and slowing demand due to economic weakness," said Bryan Lewis, research vice president at Gartner. "Semiconductor companies' third-quarter guidance is well below seasonal averages. The current guidance by vendors points to flat to down third-quarter growth. Typically, we see guidance for 8 to 9 percent growth in the third quarter because of back-to-school and the holiday build. The supply chain is also showing significant slowdown, and semiconductor-related inventory levels are still elevated."

A key market, PC’s were said to have slowed, to 3.4% growth this year, compared to previous estimates of 9.5% growth. Another key market, mobile phones has also slowed slightly with the expectation of 11.5% growth compared to 12.9% earlier.

According to Gartner, DRAM has been badly hit by reduced PC demand and falling prices and is now expected to decline 26.6% in 2011.

However, NAND flash and data processing ASIC are the fastest-growing device areas in 2011, with about 20% growth expected by Gartner. This growth is due in part to the strong demand for smartphones and iPads.

 "2012 is the wild card. We have lowered our 2012 semiconductor forecast from 8.6 percent to 4.6 percent due to a worsening macroeconomic outlook. However, the odds of a double-dip U.S. recession continue to rise and are raising fear that sales prospects will deteriorate further. Gartner is closely monitoring IT and consumer sales trends for any significant signs of weakness," concluded Lewis.