A Chip Glut in 2007?

New electronic devices and a relatively strong economy are encouraging semiconductor manufacturers to produce microchips at full tilt. Yet this current high demand may lead to an oversupply in 2007, especially if, as Gartner and other analysts predict, a slowing global economy weakens demand for chips.

Obviously this is bad news for chip manufacturers, and it could be a mixed blessing for consumers. While chip prices could fall to make electronics more affordable than ever, a cooling economy could lessen manufacturers' incentive and ability to develop new chips that are faster, more energy efficient, and have greater capacity.

UPDATE: Applied Materials CEO Mike Splinter argues that the chip market will remain healthy next year, with no risk of producing a glut. Increased use of flash memory and the expected impact of Windows Vista will help make 2007 "a reasonably good year" for the semiconductor industry.

Source: Forbes.com