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To: Sun Tzu who wrote (583)	1/11/2000 1:28:00 PM
From: Allen champ	Read Replies (1) \| Respond to of 684

Amidst upbeat forecasts, one researcher still warns of slump By J. Robert Lineback Semiconductor Business News (01/11/00, 10:07:41 AM EDT) PEBBLE BEACH, Calif. -- During a totally upbeat Industry Strategy Symposium here, semiconductor equipment executives were doused with a bone-chilling thought. Analysts from Advanced Forecasting Inc. stunned the meeting by predicting an 80% probability of a significant downturn in semiconductor sales during 2000. The short-term forecast runs completely counter to other presentations being made at the annual executive summit, which runs at a posh golf resort here until Wednesday. For example, chip analyst Bill McClean of IC Insights Inc. told the meeting that his forecast of 22% growth in semiconductor revenues might end up being too conservative. McClean is predicting that chip sales will grow to $179.1 billion in 2000 from $147.1 billion in 1999. In another forecast at the ISS meeting, VLSI Research Inc. today will predict a 25% increase in chip revenues in 2000. The strong growth in chip sales will fuel demand for new semiconductor production systems, said analyst G. Dan Hutcheson of the San Jose research firm. He is predicting semiconductor equipment sales will grow 27.4% to $37.6 billion in 2000. Analysts at Dataquest also called for a significant recovery in capital spending as chip sales move close to $200 billion in 2000, based on a recently revised forecast. But Moshe Handelsman of Advanced Forecasting repeated earlier warnings of chip markets becoming overheated by double and triple ordering of ICs. His company's 19-month short-term forecast shows an "elbow" in the trend line during the second quarter of 2000. "This will impact new orders for frontend equipment," warned the Cupertino, Calif.-based analyst. "All I can do is ring the bell," he told the large gathering of executives. Handelsman compared the current situation to 1995, when most industry analysts and manager believed sharp downturns were no longer possible in the chip industry. "Will you keep ramping up like in 1995?" he asked executives, who seemed to shrug off Handelsman's current warning. After several years of extremely strong growth, the semiconductor industry nose dived in 1996 because of too much production capacity. In 1998, semiconductor capital equipment suppliers suffered one of their worst recessions ever, but a turnaround began in 1999 as chip makers began to burn off excess capacity. Advanced Forecasting claims its quantitative Short-Term IC Forecast has accurately predicted five downturns since the mid-1980s. One of those slumps--in 1993--was an isolated downturn with only Japan's analog chip segment and test equipment suffering a short-term setback, said Handelsman, but the others were major recessions. After his presentation, Handelsman said the data points in his model leave open the possibility that the 2000 slump will be isolated to specific products or regions of the world. "This is why there is an 80% probability of a significant downturn," he added. The next data point will be added to the model on Feb. 10, and at that time Advanced Forecasting believes it will be able to fully characterize the scope of the 2000 slump that the research firm says is "just around the corner."