Chip sector expected to rebound next quarter
By Hiawatha Bray, Globe Staff, 9/25/2001
The economic news has been bleak since the Sept. 11 attacks on the World Trade Center and the Pentagon, but a leading player in the computer-chip industry said the worst is probably over for that battered manufacturing sector.
George Scalise, president of the Semiconductor Industry Association, told an audience at Harvard University's Kennedy School of Government that the fourth quarter would show an upswing for companies that produce computer chips and other silicon-based products.
''What we're dealing with here is a cyclical issue that is largely, largely inventory related,'' said Scalise. Sales of computers and other electronic devices slowed just as the industry was doubling its investment in new chipmaking equipment, from $25 billion in 1999 to $48 billion in 2000. So as the new equipment came online, the semiconductor industry found itself producing chips faster than it could sell them.
In January, said Scalise, the industry had worldwide unsold inventories worth $15 billion. But as of April, the global electronics industry once again began buying more chips than were being produced at the world's semiconductor plants. That meant they were dipping into inventories, which have dropped to about $8 billion. ''We continue to feel ... that the September quarter is the last down quarter in this cycle,'' said Scalise.
A war-related slump in consumer confidence could darken the industry's prospects, but the war itself could actually provide a boost to the industry. That's because the military will need vast numbers of high-tech devices, such as handheld computers and personal navigation devices for soldiers. ''I think we're going to make a major contribution'' to the war effort, Scalise said.
Over the long run, Scalise was even more optimistic. He said that chipmakers will be able to continue regularly doubling the processing power of microchips for the next 10 to 15 years, meaning constant improvements in the capabilities of electronic devices, and constant incentives for consumers to upgrade.
The industry's biggest worry isn't recession or war, said Scalise, but reduced federal funding of research and development in chip-related sciences like physics and chemistry. ''This is the number-one issue facing the semiconductor industry,'' said Scalise, who added that he'll bring up the issue at a meeting at the White House this week.
Hiawatha Bray can be reached by e-mail at bray@globe.com.
This story ran on page D2 of the Boston Globe on 9/25/2001.
boston.com
Ibexx |
