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To: maceng2 who wrote (645)	9/27/2004 3:46:57 PM
From: maceng2	Read Replies (1) of 1417

Semiconductor Sales Growth Looks Strong for 2005 reed-electronics.com [Make of this what you like. My experience says busts occur just before big expected booms in the semi biz.. pb] James Haughey, Director of Economics, Reed Business Information -- Semiconductor International, 9/1/2004 The semiconductor sales pace picked up markedly month-to-month earlier this year from February through June — a cumulative 22.5% gain in seasonally adjusted sales. Is this the sales peak for this expansion cycle? Some of the more pessimistic market forecasts imply flat or falling sales during the summer, then renewed but slim sales growth only until early next year when a sustained downturn begins. While there is likely to be one or two months of flat or even declining semiconductor shipments reported by the end of this year, 2005 sales growth will be stronger and last longer into the year than most expect. Ominously, price increases accounted for two-thirds of the 4.1% gain in seasonally adjusted June shipments. Processor and DRAM prices were higher for computer assemblers, and ASIC and DSP prices were higher for telecom manufacturers. Prices were driven higher in both markets by expanded production and by the use of more complex circuits to add user functions. While most of the recent price increases for these parts will hold, further large price rises are unlikely for several months. The weak sales in summer 2004 do not signal the end of the market expansion, but are the result of a mini inventory adjustment needed to stay on track with the overall slowing of economic growth in the United States and China from unsustainably high levels early in the expansion period to only above average. Every product and geographic market has been impacted by this same adjustment to a slower pace of economic growth. It has appeared in economic reports for employment, consumer spending and factory production in the United States, Europe and Asia. The slowdown only lasts one or two months. Preliminary evidence of resumed growth in consumer spending and factory production was already in hand by early August. How much more semiconductor sales growth is left in this market expansion? Monthly seasonally adjusted semiconductor shipments have nearly doubled already since the bottom of the market recession in July 2001 to June 2004. That matches a similar sales surge from trough to peak in 26 months in 1998-2000 (Figure ). But remember that the 1998-2000 doubling in sales was the recovery from a relatively mild 15% decline in semiconductor sales and extended beyond the expansion in the rest of the economy. The current sales recovery is from a 45% sales decline. Before serious inflation and inventory problems appear, there is enough sales growth left in this expansion to produce 30% semiconductor shipments growth in 2004 and nearly 20% more in 2005. The tail end of this market expansion in late 2004 and 2005 occurs during the high growth, pre-inflationary phase of the world economic expansion. Therefore, it will be supported by rising economic demand.

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