TAIPEI - Foxconn Group's Hon Hai Precision Industry Co stocks fell sharply, closing at NT$181.5, down 6.9%, to the lowest level since August 2006. The drop comes on the heals of Foxconn's announcement that it will provide permanent contracts to employees with more than eight years of service. The market reaction to the new labors laws that go into effect in China next month are consistent with growing concerns over rising labor costs in the region.

SAN JOSE – Gartner Inc. lowered its 2007 semiconductor forecast to 2.9%, down from 3.9%.
 
The research firm also tempered its estimates for 2008, saying growth will hit 6.2%, versus earlier predictions of 8.2%. However, Gartner raised its 2009 forecast to 8.5% growth, up from 6.1%. 
 
Gartner projects a 4.8% CAGR for semiconductors from 2006 to 2011.
 
Gartner lowered its near-term forecast because it believes the industry will face tougher challenges as it moves to 32-nm process technology, according to published reports.
 
Gartner’s preliminary 2007 figures showed Toshiba, Qualcomm and Hynix as top performers and Advanced Micro Devices, Freescale and IBM coming in at the bottom.
 
"The market is maturing, and it is time for further consolidation," said Bryan Lewis, a vice president of semiconductor research. "If you don't have scale or a clear way to add value, you need to consider exiting this business," he said.
 
Continuing price pressure in growing consumer markets such as cellphones and LCD TVs, and an oversupply of DRAMs, have tightened the situation.
 
Lewis suggests a recession of as much as a 5% contraction in chip sales could happen in 2008 if oil prices do not level off, and if holiday sales falter.
 
In 2009, 32-nm designs could worsen the situation, says Gartner, which says costs of developing a 32-nm device could reach $75 million.
 
For chipmakers, process development costs for 32-nm could reach $3 billion, while costs for a 32-nm fab are estimated to reach $3.5 billion, Lewis said.
 
Toshiba was the fastest-growing chip company this year, rising 27.8%, says Gartner. At the bottom, AMD fell 22.4%, while Intel rose 8.2%. IBM had a difficult year after surging in the double-digits last year, Lewis said.