STAMFORD, CT -- A leading research firm has lowered its 2011-12 outlook for worldwide semiconductor growth, citing overinventory and slowing demand.

Gartner dropped its 2011 revenue forecast to $299 billion, a 0.1% decline from 2010. The revised outlook is down from the research firm's second-quarter projection of 5.1% growth.

"Three key factors are shaping the short-term outlook: excess inventory, manufacturing overcapacity and slowing demand due to economic weakness," said Bryan Lewis, research vice president at Gartner. "Semiconductor companies' third-quarter guidance is well below seasonal averages. The current guidance by vendors points to flat to down third-quarter growth. Typically, we see guidance for 8 to 9% growth in the third quarter because of back-to-school and the holiday build. The supply chain is also showing significant slowdown, and semiconductor-related inventory levels are still elevated."

PC production unit growth has significantly decreased. Last quarter, Gartner estimated PC production growth of 9.5%; that has now been reduced to 3.4%. Gartner also cut its forecast of mobile phone production unit growth 140 basis points to 11.5% in this most recent outlook.

The company also provided updated guidance for memory components. DRAM has been severely impacted by reduced PC demand and falling prices and is now expected to decline 26.6% in 2011. NAND flash and data processing ASIC are the fastest-growing device areas in 2011, with about 20% growth. This growth is due in part to the strong growth in smartphones and iPads.

"2012 is the wild card. We have lowered our 2012 semiconductor forecast from 8.6% to 4.6% due to a worsening macroeconomic outlook," Mr. Lewis said. "However, the odds of a double-dip U.S. recession continue to rise and are raising fear that sales prospects will deteriorate further. Gartner is closely monitoring IT and consumer sales trends for any significant signs of weakness."

Semiconductor sales are considered a leading indicator for printed circuit board design and assembly demand.