Falling global chip sales in 2005 tipped
Reuters
New York, December 2
Global semiconductor sales are forecast to fall two per cent in 2005 amid an ongoing supply glut, a sharp reversal from the 26 per cent growth expected for this year, research firm IDC predicted on Thursday.
Market researchers IDC of Framingham, Massachusetts, said that the market for electronic chips was suffering from overcapacity that would take a year to work through before returning to an unspecified level of growth in 2006.
"The correction was brought on by production plans that outstripped real demand," IDC vice-president of Semiconductor Research Mario Morales said of the glut of inventory that began to take shape in the middle of 2004.
"These inventories will linger into the first half of 2005 as suppliers adjust to meet market conditions," he said.
Industry revenue is set to reach $210 billion during 2004, IDC said. But the first half of 2005 will see rising price pressures, lower factory usage, and greatly reduced capital spending as chipmakers work off excess supply.
While the industry takes drastic measures to rein in production in 2005, underlying demand by companies for new computers, by mobile phone users for replacement handsets and by consumers for all manner of new electronic gadgets should come to the rescue, IDC said.
Between 2003 and 2008, IDC said it expected the market for chips used in computers, communications and other electronic gadgets to enjoy a five-year compound annual growth rate (CAGR) of 11.3 per cent.
Morales said that cutbacks in spending on new chip factories, equipment and production of the silicon wafers on which semiconductors are made should tighten chip supplies and help prices stabilize in the second half of 2005.
Capital spending in 2004 surged 48 per cent as suppliers overestimated upcoming demand foowing a several year industry downturn.
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