Global chip market on the way up

Analysts in Japan are predicting a resurgence for the worldwide semiconductor industry in the second half of the year, despite a tough first quarter.

Semiconductor shipments will grow 5.4 percent globally in 2007, according to analysts from Nomura Securities in Tokyo. 

The firm's research department revised its earlier prediction of 9.6 percent growth after Flash memory and DRam prices plummeted in the first quarter.

Microsoft's Windows Vista, despite being slow to gain traction so far, will contribute to PC shipment growth of 11.3 percent, up from 9.5 percent last year, Nomura predicts. PC shipments have a strong correlation with higher chip sales. 

Vista requires more memory than previous versions of Windows to run smoothly with all features turned on. DRam sales will therefore see a partial recovery in the second half of the year.

However, consumers will still benefit from an average DRam price reduction of more than 30 percent during 2007 as more advanced manufacturing techniques bring prices down.

Nomura is positive about profits at two leading Japanese DRam chip makers, Elpida Memory and Toshiba. 

Both firms are notable in Japan for their ability to remain afloat on a tide of outsourcing to Asian manufacturers in Taiwan, China and elsewhere.

While still manufacturing higher margin products, Elpida outsources the majority of its PC DRam production overseas.

"With semiconductor demand shifting to non-Japan Asia, Japanese semiconductor makers' market share is in structural decline, a trend to which we largely attribute the Japanese semiconductor makers' status as laggards in the unfolding recovery," wrote Nomura's researchers in a recent monthly report on the semiconductor industry.

The analyst also expects higher demand for chips used in phones and digital consumer electronics. Products of this nature will contribute to a recovery in Nand Flash memory chip prices.

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