Chip growth surges in all segments thanks to communications, says SIA midyear forecast
By J. Robert Lineback
Semiconductor Business News
(06/08/00, 09:09:21 AM EDT)
SAN JOSE -- For the first time in four years the semiconductor industry is firing on all product cylinders. Growth rates for all major categories in 2000 range between 16% (for microprocessors) and to 116% (for flash memories), according to the new mid-year forecast released by the Semiconductor Industry Association here.(See table on product segments below.)
On Wednesday, the SIA boosted its forecast for worldwide semiconductor revenues to $195 billion in 2000 from its original prediction of $174 billion at the start of this year. The mid-year forecast, released during a luncheon in nearby Redwood City, hikes the overall growth rate to 31% in 2000 from the SIA's 21% projection issued last October. Moreover, the U.S. trade group said it now expects the chip industry to reach $312 billion in sales in 2003, with most product categories showing steady or strong growth during the next three years (see June 7 story).
In addition to the traditional major product categories, optoelectronics has emerged as a star player in the current upcycle, said John Dickson, executive vice president and CEO of Lucent Technologies Inc.'s Microelectronics and Communications Technologies unit. During his presentation of the mid-year forecast at the SIA luncheon, Dickson referred to optoelectronics devices as the new "belle of the ball," suddenly moving from "a very ho-hum industry or market in the past decade" to spectacular growth.
"Going forward we see absolute explosive growth," Dickson told the gathering of industry executives, analysts and press. "From Lucent's point of view, we would say this [SIA mid-year forecast] understates what is happening in optoelectronics."
The new SIA forecast shows sales of optoelectronics devices jumping 32% to $7.6 billion worldwide in 2000, followed by 29% growth to $9.9 billion in 2001, and 26% growth to $12 billion in 2002. By 2003, the opto chip market will be $15 billion with an increase of 23% in that year, according to the SIA mid-year forecast.
The growth in optoelectronics is being fueled by growing demand for high-speed backbone communications equipment for Internet access, video, and data transmissions. "As part of my own business [at Lucent], we have [an optoelectronics] business that will probably grow in triple digits this year," Dickson predicted, hinting that the company's revenues in this segment are now running at an annual rate of $600 million. "We are severely capacity limited, and I think this is going to become a significant opportunity for the industry."
But communications is also driving strong growth in the existing major semiconductor categories as well, causing the SIA and many market research firms to increase forecasts for growth in the next couple of years. "This is the first time in 15 years that an upcycle has been led by something other than the computing industry and the first time since 1996 that our industry is back on the long-term growth rates," Dickson told the SIA luncheon.
"It would appear there is no end in sight to the communications explosion," he declared. "At least from the service provider level, it could well be for the next five to 10 years they are supply limited in terms of how they run out their networks and build them."
If so, that's great news for the semiconductor industry, which suffered one of its worst downturns ever in the late 1990s and has had trouble overcoming excess production capacity in the past couple of years. But chip-making plants are now nearly tapped out, according to the latest industry statistics, which show 8-inch wafers fabs running at 99% of their installed capacity (see June 2 story). And shortages of more ICs are expected in the second half of 2000, driving up average selling prices.
The communications drive is causing nearly all chip segments to rise with the tide. Microprocessor revenues--heavily influenced by personal computer shipments--will return to double-digit growth in 2000 partly because of new applications in communications, driven by the Internet, said the SIA forecast. MPU sales are now expected to grow 16% to $32 billion in 2000 from about $28 billion in 1999, the new forecast said. By 2003, processor sales are expected to reach $42 billion.
One of the fastest growing product segments is digital signal processor (DSP), which will increase 55% to $6.8 billion in 2000, and reach $14 billion by 2003, according to the SIA.
The hottest growth market currently is flash memory, which will increase 116% to $9.9 billion in 2000 after jumping 83% in 19999 to $4.3 billion in sales, Dickson noted. Even DRAMs are now getting a lift in the upcycle after a severe drop in revenues that pushed sales to $14 billion in 1998 from the high point of $41 billion in 1995. DRAM revenues are expected to grow 42% to $29 billion in 2000 and 44% to $42 billion in 2001, said the new SIA forecast.
Semiconductor growth by product categories
Chip segment 2000 (% growth) 2001 2002 2003
Discretes $16 billion (22%) $19 billion (15%) $20 billion (8%) $21 billion (3%)
Optoelectronics $7.6 billion (32%) $9.9 billion (29%) $12 billion (26%) $15 billion (23%)
Analog $30 billion (35%) $36 billion (23%) $43 billion (17%) $48 billion (11%)
MOS logic* $31 billion (33%) $39 billion (28%) $49 billion (24%) $59 billion (21%)
MOS micro ICs** $62 billion (20%) $74 billion (19%) $84 billion (14%) $93 billion (11%)
Microprocessors $32 billion (16%) $36 billion (14%) $40 billion (114%) $42 billion (5%)
Microcontrollers $19 billion (37%) $25 billion (29%) $29 billion (18%) $34 billion (16%)
MOS memory*** $48 billion (47%) $65 billion (37%) $69 billion (6%) $76 billion (10%)
DRAMs $29 billion (42%) $42 billion (44%) $44 billion (5%) $50 billion (13%)
Flash $9.9 billion (116%) $13 billion (34%) $14 billion (9%) $14.5 billion (1%)
Source: SIA Mid-Year Forecast
*Includes programmable logic, ASICs and standard logic
**Includes microprocessors, DSPs, microcontrollers, peripheral devices
***Includes DRAM, flash, and other memories
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