Semiconductor Forecast Improves: Gartner

Consumer spending will boost the market as commercial spending takes a nap.

Gartner has increased its forecast for the worldwide semiconductor market after its analysts found that the slowdown in the U.S. economy did not have that great of an impact on commercial and consumer spending habits.

On June 2, Gartner boosted its 2008 revenue forecast to $286.5 billion, a 4.6 percent increase from 2007 when revenues hit $273.9 billion. Originally, the research company called for the market to grow only 3.4 percent from 2007 to 2008.

While the annual revenue increase in 2008 is modest, John Barber, an analyst with Gartner, said the market was not as weak as the research company originally forecast. The semiconductor market was helped along by consumer spending, especially purchases of PCs, cell phones and other gadgets such as navigation devices.

"This market is being more and more driven by the consumer," said Barber.

On the enterprise side, Barber said businesses were buying enough hardware-PCs, cell phones and servers-to keep up with infrastructure demands, but the spending in this market remains conservative. When Dell announced its latest quarterly report May 29, the company also found IT would be slow through the 2008 summer.

Originally, Gartner analysts were looking for a rebound in IT spending. That trend never materialized but, nor did spending drop.

"We had fairly weak IT spending in 2007 and we were expecting that to rebound this year," said Barber. "What has happened is that there is not a rebound because of the macroeconomic conditions, but we don't see a significant weakness in that area either. ... I think they [enterprises] are buying just to keep up with their infrastructure demands. It's not a growth environment, but it's also not an environment that is going to lead to negative growth."


The memory market remains the one weak point, dragging the rest of the market. For the year, the DRAM (dynamic RAM) part of the market is expected to see its revenues decline 11 percent due to an overabundance of product that is pulling down the average selling price across the board.

In his forecast, Barber said he believes DRAM prices will increase and the market will bounce back in 2009 and 2010, when the supply and demand balance out. Some analysts are already seeing the market balance itself. DRAM prices have increased 20 percent since mid-May, Hans Mosesmann, an analyst with Raymond James, wrote in a June 2 research note.

Intel remains the dominant vendor in the worldwide semiconductor market followed by Samsung, according to Gartner.