An oversupply of semiconductors is expected to cause the market to shrink next year, according to a market research firm.
Increasing inventories and price cuts are expected to drive revenues down by 2 percent next year to US$205.4 billion, International Data Corporation (IDC) said in an industry update released this week.
The researcher in May had estimated the market would increase by 7.6 percent.
"The semiconductor market has entered a correction phase triggered by OEM (original equipment manufacturers) production plans outstripping real demand," IDC analyst Mario Morales said in a statement.
"OEM push-outs and cancellations of semiconductor orders in Q2 (second quarter) resulted in inventory overhang for suppliers."
Nevertheless, IDC expects the industry to adjust output by the second half of next year.
The industry is expected to see a compound annual growth rate of 11.3 percent from 2003 to 2008, with revenues increasing from US$166.4 billion to US$256.8 billion, respectively.
A 26 percent increase to US$209.6 billion is projected for this year.
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