RealTime IT News

Report : Chipmakers to See Double-Digit Growth

After a two-year drought, the semiconductor industry is poised to have one of its best sales seasons, according to a report issued Wednesday.

As part of its Tech Investor Summit, analysts with Gartner said the worldwide semiconductor market is forecast to reach $174 billion in 2003, an 11.7 percent increase over 2002 when revenue totaled $156 billion.

The forecast comes on the heels of what as been a tumultuous year for chipmakers who have suffered from the effects of the war in Iraq, a droopy U.S. dollar, and the SARS epidemic.

The outlook is even better in 2004, as the Stamford, Conn.-based research firm estimates the semiconductor market will reach nearly $210 billion, an increase of more than 20 percent over 2003. That would be the highest level for market demand in the semiconductor industry since it hit $222 billion in 2000.

"The surge in semiconductor sales over the past two quarters has been mainly a supply-driven story," said Jeremey Donovan, research vice president for Gartner's semiconductor research group. "Capacity utilization is marching upward and the quarterly Dataquest Semiconductor Inventory Index (DASI) reveals that semiconductor inventory in the supply chain is near ideal levels. Moreover, on the demand side, there have been encouraging signs of third quarter economic growth that should gradually trickle into improvements in IT spending."

The estimates are aggressive yet right in line with what industry trade groups have been saying all year. Earlier this month, the Semiconductor Industry Association (SIA) said global sales of semiconductors in 2003 are on par to increase by 15.8 percent to $163 billion. But more importantly, the San Jose, Calif.-based trade group is projecting 2004 revenues to increase by 19.4 percent to $194.6 billion. As part of its forecast for 2003-2006 the SIA said a slight market correction of only 5.8 percent growth to $206.0 billion in sales is anticipated for 2005. The trade group is only anticipating a short correction, however, as it predicts the numbers should start to swing back to 6.6 percent to $219.6 billion in 2006.

Gartner's analysts said that in front-end semiconductor manufacturing, silicon demand is increasing, overall wafer fab utilization now exceeds 80 percent and leading-edge foundry wafer pricing has firmed.

The story is much the same in packaging and assembly. Overall, researchers found these companies are able to use more of their inventories on a monthly basis and leading-edge capacity has tightened as demand grows for advanced packaging solutions.