LOS ALTOS, CA – Semiconductors have fallen, revenues slowed and factory investment has headed south. In fact, outlays for chip facilities are forecast to be off 20.3% this year after a modest 5.7% advance in 2007, says Henderson Ventures.

Rollercoaster investment spending has created a corresponding pattern for IC manufacturing capacity utilization. Because factory utilization has crept from 86.4% in the fourth quarter 2006 to 89.3% during the second quarter 2008, chip prices were up 5.5% during the second quarter, according to the firm. Consequently, global semiconductor revenues were up 8% during the same quarter, even though unit deliveries grew little because of inventory divestment.

Looking ahead, PC and mobile phone manufacturers are upbeat about second-half prospects. Their enthusiasm is evident in the 12% jump in semiconductor bookings during the second quarter. As a result, Henderson has forecast a relatively optimistic 8.9% increase for shipments this year, after a meager 3.2% gain in 2007.

But the spreading global economic slump will undercut 2009 consumer spending for PCs and cellphones, the firm adds. Unit semiconductor growth will suffer, but the plunge in 2008 investment spending will keep chip prices from cratering. Consequently, 2009 revenues are predicted to increase 7.2%. An economic revival is forecast to spur a 14.5% jump in chip sales in 2010.

SIA President George Scalise cited demand for consumer electronics, PCs and cellphones – which account for about 80% of chip demand. LCD TV units are projected to increase 32% this year, and digital set-top boxes and digital still cameras 20%, PC unit growth 13%, and cellphones over 10%, he noted.

"We are enjoying the benefits of the strong 3.3% second quarter GDP growth in the US, and continued strength in world markets."

Overall capacity utilization was 89% – with leading edge above 95%.

SIA reported that sales of DRAMs and NAND flash memory continued to decline as a result of continuing price erosion. “Total semiconductor sales excluding memory products increased by 11.6% year-on-year and by 3.2% sequentially,” said Scalise. “The memory content of typical PCs and cell phones continues to increase. According to Micron Technology, the DRAM bit content of the average PC in 2008 will increase 56%, while the NAND flash content for the average cellphone will grow by 178%," Scalise concluded.