SGS-Thomson economist sees
growth resuming in second half
By Corrinne Bernstein
Electronic Buyers' News
AIX LES BAINS, France--SGS-Thomson Microelectronics' chief econmist here today predicted worldwide semiconductor revenues will grow a scant 6% in 1998, but sees the ingredients for gradual improvements later this year.
"A few years ago, we said that the current cycle was the worst, and we are confirming that," said Jean-Philippe Dauvin, SGS-Thomson group vice president and chief economist, during a press briefing.
Price pressure and overcapacity, soft demand in the Asia-Pacific, a slowing of exports from that region to Japan, and a softening in U.S. production of PCs led to a disappointing first quarter for the industry, after only 4% growth in 1997 and a 9% decline in 1996.
Market growth should resume in the second half of 1998 due to a better balance between supply and demand and gains in electronic-equipment production, Dauvin said. By the end of 1998, non-DRAM production capacity will be in line with demand, but the supply-demand equation will remain unfavorable for DRAM makers, he said.
Chip makers in Japan and other Far Eastern countries have cut capital spending, while U.S. and European vendors have increased or maintained their capital expenditures, Dauvin said.
The worldwide semiconductor industry's capital investments will drop 14% this year, after a 10% decline in 1997 and a 13% gain in 1996. Dauvin warned, however, that companies that fall behind in their capital expenditures will lose market share.
The semiconductor industry will need to add 35 fabs a year to accommodate growth in the next few years, said analyst Joe Grenier, vice president of the semiconductor sector at Dataquest, based in San Jose.
Also speaking at the SGS-Thomson press briefing, Grenier predicts that the electronics-equipment market will expand to $1.25 trillion in 2002 from $910 billion in 1997 and semiconductor sales will nearly double to $288 billion from $147 billion.
The computer, communications, and consumer-electronics equipment markets will continue to account for 70% of semiconductor demand, but the computers will represent a smaller share in the years to come, Grenier said.
The new semiconductor-market drivers in the next five years will be digital video, smart cards, car multimedia, digital mobile phones, computer peripherals, power-train devices for cars, and digital networking, according to Grenier and SGS-Thomson's Dauvin.
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