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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Proud_Infidel who wrote (32948)	10/27/1999 6:17:00 PM
From: Fred Levine	Respond to of 70976

From WSJ... October 27, 1999 Dow Jones Newswires Chip-Indus Group Sees Double-Digit Gains Through 2002 By DEAN TAKAHASHI Beginning a long-awaited rebound, the chip industry is expected to post double-digit gains each year from 1999 to 2002, according to a forecast by the industry's trade group. The Semiconductor Industry Association expects revenue to grow 15% to $144 billion in 1999, up from $126 billion a year earlier. That compares to an 8% decline in 1998 as sales fell to $126 billion from $137 billion in 1997. Revenue is expected to grow 21% to $174 billion in 2000, 20% to $209 billion in 2001, and 12% to $234 billion in 2002. "This is the most optimistic we've been since 1995," Doug Andrey, market analyst at the trade group in San Jose, Calif., told Dow Jones in an interview. "The use of semiconductors is shifting from PC-centric products to Internet infrastructure and wireless communications such as cellular phones. That is driving the recovery." The 1999 forecast is more optimistic than the mid-year predictions released in June, when the group predicted revenue would grow 12%. Since then, the group has increased its forecasts for the year thanks to stronger-than-expected PC and communications product sales, Mr. Andrey said. Notably, industry revenue is expected to hit $39.6 billion in the fourth quarter, topping the previous quarterly record of $39.5 billion in the fourth quarter of 1995. The SIA isn't forecasting a downturn until sometime in 2002, Mr. Andrey says. "The chip industry is seeing the benefit of the momentum of the Internet," says Brian Halla, chief executive officer of National Semiconductor Corp. in Santa Clara, Calif. "It's all about putting more and more computing power in the hands of more people." The turnaround has set in motion a scramble in the industry's supply chains. Chip factories are running at 99% capacity, compared to a low of 77% in August 1998, according to VLSI Research in San Jose, Calif. Prices for chips made by Taiwan's contract manufacturers were already rising, even before the quake shook up chip-industry supply lines. Computer makers are trying to lock in low prices, as evidenced by a long-term contract announced this week by Compaq Computer Corp. (CPQ), which will buy memory chips from Micron Technology Inc. (MU) in Boise, Idaho. "That's the kind of thing you see when the turnaround is solid," said James Morgan, chief executive officer of Santa Clara, Calif.-based Applied Materials Inc. (AMAT), the largest maker of machines used to make chips. The industry is somewhat gun-shy about predicting a long boom, since many analysts in 1995 forecast that the industry would grow beyond $300 billion in revenue by 2000, or almost double the revenue now predicted. Then a downturn struck that year, in large part because companies built too many factories for making memory chips, sending prices into a free-fall. Revenue began improving in 1997, but the rebound was hampered by the Asian currency crisis and Japan's recession. This year demand began catching up to factory capacity, with prices for chips starting to recover in July. The turnaround became more evident in recent weeks, as the earthquake in Taiwan further tightened chip supplies and caused shortages of some chips, says Mr. Morgan. Now the danger is that the shell-shocked industry may have under-invested in billion-dollar chip factories, possibly auguring shortages of dynamic random access memory chips next year. Accordingly, DRAM revenue is expected to rise 31% to $18 billion in 1999, 39% in 2000 to $25 billion. A slowdown isn't expected until 2002. The SIA's optimism is backed up by other market researchers. Gartner Group/Dataquest in San Jose, Calif., expects 1999 revenue to grow 14% and 2000 revenue to grow 17%. Pathfinder Research in San Jose, Calif., expects growth to hit 13% in 1999 and 20% in 2000. VLSI also expects 13% growth in 1999 and 23% in 2000. The forecast assumes a healthy worldwide economy and PC market growth of 13% to 17%. And the forecast anticipates that Internet usage will grow from 45 million users in 1998 to 1 billion users by 2005, accompanied by an explosion in Internet commerce. -Dean Takahashi fred