The research firm cites competition among chip makers and lower DRAM prices as reasons for the drop in sales.
Increased competition and lower prices for dynamic RAM have led to Gartner to lower its forecast for the worldwide semiconductor market, the research firm announced May 31.
In 2007, Gartner expects the semiconductor market to grow 2.5 percent with revenues of $269.2 billion. The Stamford, Conn., research firm had originally called for growth of 6.4 percent this year compared to 2006.
In the first quarter of 2007, Gartner analysts found that semiconductor sales were 5 percent lower than the fourth quarter of 2006, which was worse than expected.
Besides lower ASPs (average sale prices) for DRAM, Gartner also found that the continuing price war between the two leading chip makersAdvanced Micro Devices and Intelhad taken a toll on the market and forced the research firm to lower its forecast.
Click here to read Gartners latest report on the server market.
"Since the beginning of this year, soft semiconductor market conditions have been exacerbated by sharply declining ASPs in key device markets such as DRAM, [microprocessor unit] and application-specific standard products [ASSPs]," Richard Gordon, a Gartner analyst, said in a statement released on May 31.
"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," Gordon added.
Gartners analysis of the worldwide semiconductor supply chain found that the increase in overall inventory levels seen during the past few quarters may have peaked in the first quarter of 2007, which could mean a reversal in the coming months.
The Gartner report follows a similar study released by the World Semiconductor Trade Statistics Group on May 30. In that report, the WSTS cut its own semiconductor forecast from a growth of 8.6 percent this year to 2.3 percent.
The WSTS is now calling for sales of $253.5 billion compared to $267.8 billion.
In its report, Gartner stated that it is expecting semiconductor revenue to grow 8.7 percent in 2008 and 7.2 percent in 2009.
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