Chip growth will stay hot all year, forecasters say
By Bolaji Ojo
EE Times
January 5, 2004 (2:01 p.m. ET)
NEW YORK — The IC market recovery, now entering its second year, will see rapid growth before peaking late this year or early next and giving way to more moderate growth in 2005, analysts said.
After dropping a precipitous 32 percent in 2001, global semiconductor sales barely grew in 2002 but expanded by 18 percent in 2003, and will grow between 20 percent and 25 percent to roughly $204 billion this year, up from $166 billion in 2003, according to Merrill Lynch & Co. here.
Soaring demand for both NOR and NAND flash products from the consumer electronics market will drive the flash memory sector up 44 percent in 2004, on top of a 32 percent increase in 2003. By the end of 2005, the flash market will expand to $20 billion, up from $2.7 billion in 1997, analysts said. "Flash is going to lead the market [in 2004] because of growing memory demand for data storage in mobile phones, PDAs and digital cameras," said Dan Scovel, an analyst at Needham & Co. (New York).
On a percentage basis, the DRAM market will record the second fastest growth rate in 2004, posting a 32 percent sales spurt to $23.2 billion on a 42 percent increase in unit shipments. The DSP sector is forecast to grow by 25 percent, analog by 23 percent, MOS logic by 22 percent and MOS MPUs by 17 percent.
These explosive growth rates won't be repeated in 2005, according to Merrill Lynch. In a report, the research firm said it expects worldwide IC sales to rise 16 percent in 2005 to $236.3 billion as the industry returns to a more sustainable growth rate driven by an equally steady improvement in the macroeconomic environment.
"The relationship between economic activity and semiconductor revenues is tightening as semiconductor end markets broaden and the relative importance of the PC market diminishes," said Joseph Osha, an analyst at Merrill Lynch.
Process technology shifts are not expected to play a big role in the market this year, analysts said. Such developments typically have a limited, short-term impact. Rather, many companies will continue to pay close attention to macroeconomics and manage their businesses conservatively due to lingering fears about terrorism and the strength of the global economy.
Despite the caution, a steadily improving market may push IC suppliers to add more engineering jobs, analysts said. Many suppliers, including Agere Systems, Infineon Technologies, National Semiconductor and STMicroelectronics, have already indicated they will be adding to their engineering work force in the quarters ahead.
The new recruits will include hardware and software design engineers, with a sizable number hired for IC design centers in India and China, although Silicon Valley will see its fair share of engineering recruitments, analysts said.
Chip makers are hesitant to add capacity until plant utilization levels rise above 95 percent, and Merrill Lynch does not expect that to occur until late 2004 or early 2005. "Of course, the most important aspect is utilization by technology level, which is already at 95 percent for the leading edge," said analyst Osha. "Advanced technology accounts for over 40 percent of the installed base now [and] the high utilization rate . . . explains the accelerating demand for semiconductor equipment."
Although more capacity, especially of 300-mm wafers, will be added in the new year, capital spending will remain subdued, analysts said. A few chip suppliers, including Samsung Electronics and foundries like TSMC and UMC, are expected to sharply raise their capital expenditures in 2004, but the traditional big spenders are staying out of the fray.
Among foundries, Taiwan Semiconductor Manufacturing Co. and its joint ventures will spend $1.8 billion this year, up from $1.2 billion in 2003; United Microelectronics Corp. will increase spending to $1.5 billion from $350 million last year; Nanya Technology Corp. will spend $700 million, up from $390 million in 2003; and Siltera Malaysia Sdn. Bhd. will go to $250 million, up from $100 million. |
