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To: Ian@SI who wrote (8452)	7/13/2000 12:38:32 PM
From: Jim Oravetz	Respond to of 10921

Capital spending up as slowdown looms By Anthony Cataldoand J. Robert Lineback, EE Times Jul 7, 2000 (1:29 PM) URL: eetimes.com TOKYO — Only a year into the roaring semiconductor-sector recovery, the end appears near. Enormous capital outlays in Japan, combined with lessening materials shortages and shrinking product lead times, are prompting some analysts to suggest that the nearly $200 billion market will cool markedly starting a year from now and enter a period of price-plummeting overcapacity. "It is beginning to feel a lot like 1995," said veteran chip industry analyst Bill McClean, president of IC Insights Inc. (Phoenix), referring to the red-hot market of five years ago that went cold in one quarter. The transformation ushered in three years of negative or slow growth. While the market is expected to grow in 2000 from $195 billion to $234 billion, propelled by strong demand for cell phones and related components, concerns about the end of 2001 and 2002 are trickling throughout the industry, particularly with the shift to 300-mm wafer manufacturing (and its attendant capacity boost) in the wings. "The severity and the depth of the slowdown still depend upon [capital] spending for next year [2001]," cautioned McClean. "Right now, we're looking at a slowdown in semiconductor revenue growth of probably 8 to 9 percent in 2002." This year, by contrast, McClean believes worldwide chip revenues could end up growing close to 40 percent because of strong unit demand and rising average selling prices. "If the chip industry increases capital spending much [from McClean's current forecast of 25 to 30 percent growth in 2001], then we are probably looking at negative-growth numbers for semiconductor revenues in 2002," the analyst said. McClean last month warned his clients that too much capacity, coupled with a "growth recession" in cellular phones and an economic slowdown, will most likely cause the start of a downturn in 2002 rather than in 2003, which was the consensus until recently. snip\/ Some comments are made on why SSB came out with the sour notes last week. Worthwhile reading. Jim