Trade Group Predicts Turnaround in Chip Sales Next Year
From NY Times(http://www.nytimes.com/2001/11/08/technology/08CHIP.html):
AN JOSE, Calif., Nov. 7 — The trade association for the semiconductor industry predicted today that the sharpest ever decline in chip sales would turn around next year with 6 percent growth, followed by a full-blown recovery in 2003.
The forecast by the Semiconductor Industry Association, which represents most chip makers, was more optimistic than several other predictions by independent research firms, which believe the market will grow only slightly at best and shrink 7 percent at worst.
The semiconductor association, which is based here, said chip revenue this year would fall 31 percent, to $141 billion, after a record surge in sales pushed the industry up 37 percent in 2000, to $204 billion. The 31- percent decline would nearly double the decline in 1985, the sharpest drop on record, when the market fell 17 percent.
The association predicted that demand would remain weak in the first half of next year but pick up substantially in the last six months, pushing the market to $150 billion, a 6 percent increase over 2001.
The momentum will carry into 2003 and 2004 with 21 percent growth for each year, the association said.
The recovery is expected in every region of the world. The forecast called for 4 percent growth in the Americas, which slumped 43 percent this year, and 1 percent growth in Europe, which declined 29 percent this year. Asia, which declined 23 percent this year, is expected to lead the surge with 14 percent growth.
The sales of computer chips, the computer brains in everything from personal computers to cell phones to automobiles, are widely seen as a sign of the technology industry's health. While manufacturers of memory chips and networking processors continue to suffer through a terrible slump, chip makers for PC's and wireless devices have seen signs of improvement in recent months, though revenue has lagged because of price wars.
George Scalise, the trade association's president, said makers of PC and wireless chips have largely cleared out their excess inventory and are beginning to see increases in orders. He said his forecasters believed early evidence that consumers would spend about as much money this holiday season as last. More electronics sold means more chips sold.
"We've been through these cycles before, and we know this too shall pass," Mr. Scalise said. "The industry will continue to grow as it has in the past."
But Wall Street analysts and independent research firms varied in their hopes for the extent of the upturn. Several agreed that 2003 would improve dramatically over 2002, by as much as 25 percent. But they questioned whether the industry could improve enough in the second half of next year to offset an expected slow first six months.
"It's very hard to see anything better than flat in '02, because you're starting in a very deep hole," said Mark Edelstone, an analyst with Morgan Stanley.
The International Data Corporation, based in Framingham, Mass., has predicted the chip industry would decline by 7 percent in 2002, the first ever consecutive years of shrinking sales. Mario Morales, a senior vice president in the company's semiconductor group, said the number of chips sold would improve, but their average selling prices have decreased so sharply that chip makers would have trouble surpassing their sales, even compared with such a dreary year as this.
"The major impact is really the price erosion we've witnessed over the last couple of quarters, in not only the PC-related markets but also the wireless and network equipment markets," Mr. Morales said.
IC Insights, a research firm based in Scottsdale, Ariz., predicted a 1 percent increase next year. But the company's president, Bill McClean, acknowledged that companies and consumers could take very little prodding to cut back spending on electronics even further.
"If the U.S. economy proves stubborn to interest rate reductions, and people don't feel comfortable spending for one reason or another, we could easily see single-digit negative growth rates next year," he said. |
