Building up a profit with components

Research house iSuppli has found that the Annual Growth Rate (AGR) for the semiconductor market in 2007 came in lower than previously expected.

The 2007 annual growth rate came in lower than the 4.1 percent forecast in the fourth quarter. Strong growth did still occur in the second half of last year. However, the projected growth was stunted by an 11 percent plunge in memory IC revenue.

A weak first half in 2006 and 2007 was followed by a 10 percent growth in the second half of the year, a trend likely to be repeated in 2008 as the seven percent expected revenue decline in the first half will be corrected by a 14 percent revenue growth in the second half.

With some electronic uncertainty, weakening consumer confidence and declining memory ASPs, the forecasts for both electronic equipment and semiconductors have dropped since the last forecast.

The 2008 equipment revenue growth has dropped by 0.7 percent to 5.9 percent, while the 2008 semiconductor forecast has dropped 3.5 percentage points from 7.5 percent to four percent. iSuppli does not expect double-digit semiconductor revenue growth over the 2007 to 2012 forecast period.

iSuppli has also found that dynamic random access memory (DRAM) revenues have been in decline since late 2007. This revenue decline will continue into 2008 and lead to a 12 percent revenue deficit in the first half, compared to the second half of 2007.

Although a recovery is anticipated to start in the second quarter of 2008 – leading to a second-half uptick of 33 percent revenue growth over the first half – it will not be sufficient to make up for the first half, and revenues will be flat for the year. Modest revenue growth will be seen in 2009, but a return to double-digit growth does not seem likely until 2010.