Semiconductor prices are a little softer than what I was looking for, so even though unit volumes are good, I am going to slightly reduce my dollar sales forecast for the year. The weakness is in memory chips, especially DRAM (Micron) and NAND flash (SanDisk) -- commodity chip producers. There are plenty of reasons to think DRAM and NAND flash prices could stabilize or even go up a bit, but it hasn't happened yet. Year-to-date total semiconductor sales through June were $120.9 billion, up only 2.1% from last year. January was up 10.8% over January 2006, but the year-to-date comparison has been declining ever since.

I had thought semiconductor sales would be up 7% this year, but I think it is prudent to trim that back to +5% until I see memory prices firming, which will probably happen when the demand for PCs and consumer electronics picks up. That would get us to $260 billion for the year instead of $265 billion. I know that seems like a trivial change, but it is the first downward revision of a semiconductor forecast that I have had to make in more than three years. It could be a straw in the wind, especially if high gas prices or credit problems inhibit holiday spending.