Always the optimist , hehe---> Chip industry set to rebound in 2002(one view)
(Adds analyst comments, background, additional forecast
details, paragraphs 5, 6, 9-16. Adds byline)
By Duncan Martell
SAN FRANCISCO, June 6 (Reuters) - After one its biggest
slumps, the semiconductor industry will rebound in the second
half of this year, grow 20 percent next year, and 25 percent in
2003, a trade group said on Wednesday.
What distinguishes this slump is that chip companies
started paring capacity in only two quarters, said the
Semiconductor Industry Association (SIA) in its midyear
forecast. In the last slump, which began in 1996, it noted, the
industry took 12 quarters before cutting back on capacity.
"Despite the sales decline brought on by the excess
inventory this year, the semiconductor market is still
projected to grow from $149 billion in 1999 to $283 billion by
2004," said Kirk Pond, chairman, president and chief executive
of Fairchild Semiconductor.
This year, the global chip market is forecast to shrink 14
percent, compared with a 16.5 percent decrease in 1985, the SIA
said, though many analysts have said they still believe that
2001 could surpass 1985 as the biggest year-on-year decline in
chip sales.
According to another forecast, chip sales will bounce back
to 25 percent growth in 2002, following a 12 percent decline
this year, according to market researcher Semico Research Corp.
Of course, as with past forecasts, the SIA's mid-year
forecast may require revision if economies slip into recession.
Continuing a trend begun several years ago, the
Asia-Pacific region will experience rapid growth and close in
on the America's market, which the SIA said will remain the
biggest market, in terms of revenue, for the next four years.
A slowing U.S. economy and the resulting flagging demand
for computers and electronic devices sparked the current
downturn in the semiconductor industry, which is notorious for
its boom-and-bust cycles.
A stinging fall-off in demand in the telecoms market has
not helped matters, either, as networking chipmakers have felt
the brunt of the slowdown. Across the entire semiconductor
landscape, orders have been canceled by the hundreds.
"It's a standard joke now when I get on a conference call
and say, 'Seen any orders lately'" said Needham & Co. analyst
Dan Scovel. "And near-term visibility? What does that mean? It
means nobody's giving you any orders."
In the latest sign that a rebound in the second half of the
year is not a foregone conclusion, Hewlett-Packard Co., the No.
3 computer maker, warned that its sales in May were weaker than
expected and said the technology slowdown has spread around the
globe.
It joined Compaq Computer Corp.<CPQ.N>, Sun Microsystems
Inc.SUNW.O and Palm Inc.<PALM.O>, which have all recently said
sales in markets outside the United States were sluggish. Intel
Corp.<INTC.O>, too, the world's biggest chipmaker, issued
guidance for a second-quarter sales decline of 18 percent to 25
percent from $8.3 billion a year ago.
For all of 2001, the total semiconductor market is forecast
to decline 14 percent to $175 billion, the SIA said. In 2002,
it is forecast to bounce back 21 percent to $211 billion, rise
25 percent in 2003, and 7 percent to $283 billion in 2004.
In the past microprocessors have pulled the industry out of
its slump, and analysts expect the same this time. In recent
weeks, there has been at least a modest improvement from the
dismal conditions in areas related to microprocessors, the
primary computing engines in personal computers.
"On top of improved motherboard production rates over the
last couple of weeks, order rates for processors also appear to
have picked up, owing in part to the burn-off of inventories
that had to occur as a result of channel inventories that grew
at the end of (the first quarter)," wrote Robertson Stephens
chip analyst Eric Rothdeutsch in a recent note to clients.
((-- Duncan Martell, San Francisco Bureau,
duncan.martell@reuters.com, 415 677-2536))
REUTERS
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