ISuppli slashed its global chip sales growth forecast for 2008 by nearly half on Wednesday over fears the U.S. economic downturn will crimp consumer demand for electronics goods.
The El Segundo, California market researcher lowered its chip industry sales growth forecast to just 4 per cent this year, down from a previous estimate of 7.5 per cent. Global chip sales will total US$279.6 billion this year, up from US$268.9 billion last year, iSuppli said.
The reduction stems from expected declines in sales of electronics equipment, including computers, industrial equipment, automotive gear, and wired and wireless communications, iSuppli said. The company cut its 2008 sales growth estimate on electronic equipment sales to 5.9 per cent, from 7 per cent previously. Since chips are the building blocks of electronic equipment, any slowdown in electronics sales directly impacts the global chip industry.
Other industry analysts are also cautious on global growth forecasts for this year. At a conference in Taipei last month, Merrill Lynch analyst Srini Pajjuri said his company may have to pare its projection for 8 per cent chip industry growth. “Odds are that’s looking pretty optimistic right now,” he said.
The culprit behind expectations for slower growth is the market slowdown caused by economic woes in the U.S., according to iSuppli. “The global electronic equipment market has posted five strong years of growth in a row. But weakness in some application markets coupled with a slowing trend in global economic conditions, led by a U.S. slump, dim the prospects for strong equipment growth in 2008,” Gary Grandbois, principal analyst at iSuppli, said in a report.
Merrill Lynch’s Pajjuri said global chip industry growth is impacted by U.S. economic conditions so much because the U.S. consumes 25 per cent to 30 per cent of all chips produced each year.
ISuppli noted that it is already seeing weakness in both wired and wireless telecommunications, including mobile phones.