Light at the end of the tunnel...maybe, according to this visionary:
A service of Semiconductor Business News, CMP Media Inc.
Story posted at 3 p.m. EDT/9 a.m., PDT, 8/6/98
Report suggests this is the bottom, recovery expected in 1999
By Will Wade
SCOTTSDALE, Ariz. -- The worst of the semiconductor slump may
be past, according to an article to be published tomorrow written by
two market research firms here, IC Insights Inc. and Fisher-Holstein
Inc. Bill McClean, president of IC Insights, said that the second
quarter was the low point of the current downturn in the
semiconductor industry, and he is predicting 10% growth in the
market for 1999.
"May and June may have been the bottom," he said, "for both PC
sales and semiconductors. Most of the PC manufacturers are
expecting the second half of the year to be stronger than the first
half."
McClean points to several factors that indicate the market may be
firming. One of the most important drivers is PC sales, and he noted
that most of the major computer manufacturers have cleared out their
inventory levels. Firms that were carrying ten weeks supply earlier
this year are now storing just three weeks worth of product. While
many of them say they want to cut their inventory levels down further,
to about two weeks, McClean says they are also starting to place
more orders now. And, those orders should progress through the
rest of the year, especially as the holiday buying season gets closer.
The sub-$1,000 PC, often blamed as a major factor in this year's
slump because of its effect on pricing levels, may help spur the
recovery. McClean predicts that they will be a bigger seller during
the upcoming holidays than they were last year when the inexpensive
systems were a new item. "We could see one under almost every
Christmas tree," he said.
A second factor will be memory pricing. While DRAM prices have
been hovering at rock bottom for most of the year, some companies
are starting to predict stronger prices in the near future. Micron
Technology Inc., now one of the largest memory companies after
acquiring the DRAM operations of Texas Instruments Inc. earlier this
year, last week said memory prices have begun to firm. Other
companies are cutting their production or even closing fabs, as seen
last week when Siemens AG closed a memory fab in England (see
July 31 story).
"There are signs that the worst is over," said McClean. "We're not
saying memory prices will increase, just that they won't be coming
down as fast as they have been. By definition, prices can't go any
lower than zero, and at some point the chip companies just have to
say 'No, we won't go down any more.'"
Overall, McClean said the semiconductor industry could see growth
in 1999 of 10%, followed in 2000 with a healthy 24% expansion. If
the recovery continues as expected, he said 2001 will ring in with a
30% growth rate.
A few factors could limit these predictions, most notably the
turbulence in Asia. Although Japan has lately been taking strong
actions to stanch its recession, it remains to be seen whether the
country can turn its economy around. Other countries in Asia,
notably Taiwan and China, are also question marks that can affect
the industry.
"If the yen hits 150 to the dollar and Asia collapses, then we could be
wrong," he said. "It's definitely a wild card."
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