July 13, 1999 17:52
Telecommunications Revolution Driving Market for Companies That Sell Equipment And Materials to the Semiconductor Industry
SAN FRANCISCO, July 13 /PRNewswire/ -- The current up-cycle for the semiconductor and related industries could last as long as seven years, but personal computers sales won't be driving the upswing in new orders as they have in the past.
Instead, growth will come from the world's telecommunications sector, which is rushing to keep up with demand created by the rising popularity of the Internet and shift to global business networking models.
Fred Zieber, president and founder of San Jose, Calif.-based Pathfinder Research, offered that view today at SEMICON West 99, the annual exposition held by trade association Semiconductor Equipment and Materials International. The number of companies exhibiting this year is up 11 percent this year compared to last, in large part reflecting the renewed optimism of the industry in the years ahead.
SEMI members supply the equipment and materials used to make to semiconductors, or chips, the brains behind everything from automobiles to wireless telephones.
Zieber spoke at an annual outlook briefing, and discussed the turnaround under way after a sharp downturn in 1998 for the industry. The briefing also included speakers from SEMI's professional staff about future market trends.
Zieber said the current up-cycle reflects the revolution taking place in telecommunications, and more specifically the Internet and World Wide Web.
"We are now experiencing massive shifts in lifestyles, social interactions, institutions and business paradigms," said Zieber. He said he expects this up-cycle to last as long as seven years.
The positive market is the direct result of demands for more capacity and faster connections. And to meet those needs, manufacturers are turning to such devices as "systems on a chip" and "small boxes" to help make communications faster, better and cheaper. "Bandwidth is king," he said. "Connectivity is the glue holding it all together, and transforming something that is tremendously useful in a lot of different ways."
But the chip equipment and materials industry's old reliable source of revenues and profits, the PC, won't be driving the surge in sales as the upswing progresses. That will come from the telecommunications arena, which is not as large as PCs.
"The communications market is a large market, but it is a fraction of the size of the PC market," he said. Meanwhile, Zieber noted that sales of PCs are slowing at the time their prices are falling, which makes it more difficult for everyone involved to make money in this industry.
"This isn't a highly robust semiconductor market," said Zieber. "You have a size, complexity and diversity that we haven't seen before." He also noted that more and more semiconductor companies are going "fabless," that is without their own manufacturing plants. They are outsourcing their chip production to so-called "foundries" to better concentrate on design and marketing.
But foundries won't be able to keep pace with the rising demand for production capacity as business churns ahead into the new millennium.
"Fabless-and some non-fabless folks-are going to rely more on foundries for their production," he said. Zieber predicted foundries will grow from 10 percent to 20 percent of the overall production capacity for chips. But they'd need to grow fourfold just to keep up with the demand for production capacity, something they will be hard pressed to do. "It's not possible," said Zieber. "We believe that foundries will not be able to keep up with demand."
Most of those foundries will be built in Taiwan, which is fast becoming the world's largest source of semiconductor production.
About SEMI
Based in Mountain View, Calif., SEMI is an international trade association serving more than 2,300 companies participating in the $65 billion semiconductor and flat panel display equipment and materials markets. SEMI maintains offices in Austin, Beijing, Boston, Brussels, Hsinchu, Moscow, Seoul, Singapore, Tokyo and Washington, D.C. The SEMIndex may be found at www.semindex.org and on SEMI's website, SEMI OnLine, at www.semi.org.
SOURCE SEMI
/CONTACT: Bruce Lewis, 925-284-7004, or pager, 925-279-3871, or
Jonathan Davis, 650-940-6937, or Mike Droeger, 415-978-3608, all of SEMI/
/Web site: semindex.org
/Web site: semi.org |
