Gartner lowers global chip forecast on memory doldrums

Market researcher now predicts 3.4 percent chip revenue growth this year, compared to a previous estimate of 6.2 percent

Gartner lowered its 2008 global semiconductor forecast Monday, citing falling memory chip prices  and a weakening global economy.

The market researcher now predicts 3.4 percent chip revenue growth this year to $278.4 billion, compared to a previous estimate of 6.2 percent. Last year, chip revenue reached $269.4 billion, up 2.5 percent year-over-year.

Falling memory chip prices are to blame for most of the revision, but the market researcher also warned that global economic problems could cause further trouble for chip makers.

The DRAM (dynamic RAM) market has been in recession since the start of 2007, Gartner said, and may not pull out until the end of the third quarter of this year. DRAM revenue is expected to fall 15 percent this year to around $54.9 billion, from $58.1 billion last year.

But the main cause of Gartner's chip revenue revision is the main storage memory chips used in iPods, iPhones and digital cameras, NAND flash. A severe oversupply in the NAND market  caused chip prices to fall at the end of last year, and Gartner "sees no respite in the short term."

The company halved its NAND market forecast for this year to 15 percent revenue growth.

Price declines in the NAND market may hurt the bottom line at chip makers such as Samsung Electronics and Toshiba, but it's great for consumers. The lower pricing is already showing up in cheaper flash memory cards, and additional storage in devices, as well as price declines for some great products, such as Apple's iPod Shuffle .

Last month, Apple unveiled a new 2GB iPod shuffle for $69 and lowered the price of the original 1GB model to $49.

The price of mainstream 4Gb NAND flash chips has fallen 26 percent so far this year to $4.48 Monday, according to DRAMeXchange Technology, which runs an online memory chip market.

Flash memory card prices have also declined. The price of a 2G byte SD (secure digital) card fell to $7 Monday, from $9.26 at the end of 2007, according to DRAMeXchange. A 2GB micro SD card hit $8.07 Monday, compared to $13.33 at the end of last year.

Gartner cited a more cautious view of global chip demand for part of its revision, but said that shocks to the global economy have so far not caused problems in chip revenue. That could change should further housing and credit industry problems cause consumers to rein in spending, the market researcher warned.

"We are not discounting the possibility that the demand side of the semiconductor industry could get (much) worse, which could cause a contraction in the market this year," Gartner said in its Semiconductor Monday DQ Report. The parentheses in the quote are from Gartner.

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