Trade Group Cuts Chip Forecast

Microcomputers will show a year-over-year decline.
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This year's chip business won't be so strong after all.

That's the conclusion of the latest forecast from the World Semiconductor Trade Statistics, an industry group which threw out the improved outlook it served up six months ago and reverted to a figure that was closer to its original outlook.

In May, the WSTS said worldwide chip sales in 2006 would grow 10.1% year over year to total $250 billion, up from the group's earlier forecast of 8.5% growth.

Now, the WSTS believes global chips sales this year will total $247 billion, an 8.5% improvement over 2005.

The revised projection owes to "a few, albeit significant products, whereas the majority of products remained close to the patterns predicted in the spring. The most notable decline was in microcomputers," said the WSTS in its autumn market forecast released Tuesday.

Memory and analog chips will post the strongest revenue growth in 2006, rising 17.3% and 16.1% respectively. Logic will increase 3.9%, and microcomputers will decline by 0.8%.

A fierce price war between

Intel

(INTC) - Get Report

and

Advanced Micro Devices

(AMD) - Get Report

has kept microprocessor prices under pressure this year. Analog chips, which are used in cell phones, MP3 players and other consumer-electronic products, have benefited from robust demand for an expanding array of digital gadgets.

"The WSTS foresees a continuously growing demand for electronic products such as PCs, digital consumer appliances and mobile communications, enhanced by the increase of semiconductor content per installed system. These trends are expected to unfold in a challenging, yet generally healthy world economy," said the group's forecast.

In 2007, the WSTS sees chip sales increasing 8.6%, compared with its earlier estimate of 11% growth. The group projects 12.8% chip-sales growth in 2008.