The global chip market is in for a massive decline this year, according to the latest figures from the Semiconductor Industry Association (SIA).

The SIA, an industry body, has slashed its forecast for 2007 growth to just 1.8 per cent, down from its previous forecast of 10 per cent, despite growth in certain key markets.

The downbeat forecast has been attributed to sharp declines in average selling prices (ASPs) for microchips, particularly in markets such as Dram and NAND Flash memory.

“Despite strong unit demand for semiconductors, driven by healthy growth in major end markets, worldwide microchip sales will not reach our earlier forecast of 10 per cent growth in 2007,” said SIA president George Scalise. “We now expect that total sales will grow by 1.8 per cent to $252bn in 2007, with further growth to $306bn in 2010.

“The new forecast projects a 5.4 per cent compound annual growth rate for year end 2006 through 2010,” he added. “Rapid price attrition in three key market segments – microprocessors, Drams, and NAND flash memories – is the major factor contributing to lower growth than previously projected.”

Even though PC sales are on track to hit 10 per cent unit growth for this year – or 255 million units – total sales of microprocessors will fall by 1.6 per cent with intense competition eroding prices faster than previously recorded. Dram memory sales will only grow by two per cent this year, thanks to excess inventory and prices that are now a third lower than they were last December.