AUSTIN, Texas ? Market watcher iSuppli Corp. (El Segundo, Calif.) has cut its forecast of global semiconductor revenue growth in 2007 to 3.5 percent, down from its previous prediction of a six percent rise. Weakness in sales in the first half of the year will not be offset by the current uptick in growth, the company said. Global semiconductor revenue now is expected to rise to $269.9 billion in 2007, up from $260.6 billion in 2006, according to iSuppli. The company issued its previous six percent annual growth forecast in June.

Global semiconductor revenue declined by six percent in the first half of 2007 compared to the second half of 2006, limiting market growth potential for the year.

"The major cause of the first-half semiconductor industry weakness was a 13 percent sequential decline in revenue during the period for memory, led by DRAM and NAND-type flash," said Gary Grandbois, principal analyst with iSuppli. "The memory revenue decline was spurred by a drop in average selling prices, caused by a glut of parts on the market," he added.

Ironically, the downward revision comes at a time when chip revenue is up, the memory industry is improving and the outlook for electronic equipment markets is on the rise, according to iSuppli. The revival of growth springs not only from the normal year-end seasonal strength, but also from a surge in memory prices and revenue and a stronger end-equipment market.

Global semiconductor revenue will rise by 10 percent in the second half compared to the first, marking a major turnaround in market conditions, iSuppli said. It forecasts that semiconductor revenue will rise by 9.8 percent sequentially in the third quarter and by four percent in the fourth quarter.

The market watcher predicts the expansion will continue through 2008. The total semiconductor market is expected to achieve a 9.3 percent revenue expansion next year, iSuppli said.

Memory revenue will rise by 15 percent in the second half compared to the first as price erosion is blunted and the holiday season commences, bringing stronger sales of PCs, said the market watcher. Memory chips are expected to account for 23 percent of total semiconductor revenue in 2007.

The memory price decline earlier this year was due to oversupply. DRAM vendors increased manufacturing at a rapid rate in the first half, driving a 94 percent rise in bit shipments in 2007. That compares to the industry average of 55 to 60 percent annual growth.

In the third quarter, DRAM suppliers began slowing production growth. After declining by 10 percent and 23.8 percent sequentially in the first and second quarters of 2007 respectively, DRAM revenue will rise 20.8 percent in the third quarter and will remain flat with a marginal 0.2 percent decline in the fourth quarter, iSuppli predicted.

Similarly, prices for NAND are expected to increase in the third quarter, following a 40 percent decline in per-megabyte prices in the first quarter.

While the 2007 semiconductor forecast has declined, the outlook for shipments of electronic equipment has improved. iSuppli has raised its forecast for electronic equipment revenue growth in 2007 to 6.8 percent, up from six percent previously. Of the six major electronic equipment segments, five of them?data processing, wireless communications, wired communications, consumer electronics and automotive?have been upgraded by iSuppli.

The company now expects electronic equipment revenue to rise by another seven percent in 2008, up from the previous forecast of 6.4 percent.