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

“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.

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