Semiconductor industry to show gradual improvement in 2006 - Gartner

Market research firm Gartner believes that the global semiconductor market will be "gradually improving." Cautious investment in incremental capacity additions will keep the market in a pattern of modest growth during the next few years, the firm said on Thursday.

While many semiconductor segments are under extreme pricing pressure - such as the DDR memory market - 2005 has been more successful for the industry than many voices originally had expected. The Semiconductor Industry Association (SIA) expected sales being flat with the 2004 result, research firms even warned manufacturers and investors that overall revenues were likely to decline. In the end, 2005 brought growth of 6.8%, with sales climbing from $213.0 billion in 2004 to $227.5 billion, according to the SIA.

Gartner, which estimated 2005 sales at 235.5 billion, predicts 2006 to come in at $257.7 billion, which would represent a 9.5% improvement over 2005. A mild slowdown is expected in 2007 with growth of 7 percent, followed by a cyclical market peak in 2008.

"The supply of semiconductor devices is becoming more constrained, and the downward pressure on the average selling prices of devices seen in 2005 has eased," said Andrew Norwood, research vice president for Gartner’s semiconductor research group. "Any lengthening of device lead-times in coming months will be seen as further evidence of a tightening market."