Global sales of semiconductors will shrink next year as oversupply drives down prices, said market researcher IDC, which lowered its forecast for worldwide chip revenue next year.
Industry sales will shrink 2 percent to US$205 billion, compared with a May forecast for 7.5 percent growth, as production outstrips demand and average chip prices fall 7 percent, according to Mario Morales, head of semiconductor research at Framingham, Massachusetts-based IDC.
Unless chipmakers cut capital spending by a fifth next year, industry sales may shrink as much as 11 percent next year, he said.
IDC joins the Semiconductor Industry Association, a trade group, in lowering projected industry sales, suggesting producers may have overestimated demand.
In September, Hwang Chang Gyu, head of semiconductors division at Samsung Electronics Co, the world's second-largest chipmaker, said he expected global industry sales to grow about 10 percent next year.
The Semiconductor Industry Association, whose members include leading chipmaker Intel Corp, said it expects global chip sales next year to be "essentially flat" from this year's record US$214 billion, compared with an earlier projection of 4 percent growth.
Sales of dynamic random access memory, which acts as the main memory in computers, will fall 15 percent to US$23 billion next year. Sales of flash memory, used in handheld devices such as mobile phones, will shrink 1.8 percent to US$15.5 billion in 2005, the San Jose, California-based association said.
Manufacturers including Intel and Texas Instruments Inc in the past six months have seen growth slow and have built inventory of unused semiconductors, the thumbnail-sized components that run electronics.