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To: Johnny Canuck who wrote (42617)	9/8/2005 11:30:01 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 68672

Report: High oil prices may mean lower chip sales By Michael Singer news.com.com Story last modified Thu Sep 08 17:20:00 PDT 2005 Research firm iSuppli trimmed its numbers for 2005 chip sales and modified its outlook for the industry's present growth cycle, citing the effect of rising gas prices on people's ability to shell out for consumer electronics devices. iSuppli's report, published Thursday, predicts that global semiconductor sales will still outpace last year, hitting $232.7 billion in 2005, up 2.4 percent from 2004's $227.2 billion. But that lags previous forecasts by 3 percent for an estimated 5.9 percent worldwide semiconductor growth in 2005. "A weaker-than-expected first half, coupled with the likely impact of high oil prices in the second half, have been instrumental in bringing down iSuppli's 2005 semiconductor forecast," said Gary Grandbois, an analyst with the company. Similar concerns over high energy prices were expressed earlier this month by the Semiconductor Industry Association. Analysts with the trade group estimate the current spike in fuel costs could add up to a net loss of $1,475 in excess spending cash per household per year in the United States alone. Looking at an average of 1.8 million homes, the SIA said that would add up to a $41 billion loss in U.S. consumer electronics sales and a worldwide negative impact of $23.4 billion for chipmakers. "The next couple of months will be interesting because that is when we will see how consumers react during the fall selling season," said SIA representative John Greenagel. Another troubling sign for the semiconductor industry, Grandbois said, is that he sees chip suppliers such as Intel, Advanced Micro Devices, Texas Instruments and Philips Semiconductor continuing to increase production--despite slowing growth and weakening prices. Too many chips could lead to a slowdown in manufacturing run rates, analysts said. "With the significant amount of capacity that is available, if end demand does not significantly increase, the fourth quarter will experience a slowdown in manufacturing run rates (yearly contracts)," warned Len Jelinek, director and principal analyst at iSuppli. "The severity and length of this slowdown will be determined by the amount of semiconductor inventory built up in the third quarter." Previous Next On the plus side, both iSuppli and the SIA are estimating that 2005 should mark the low point of the present semiconductor cycle, and chip sales are expected to rise by double-digit percentages in 2007, 2008 and 2009. The iSuppli report estimates worldwide chip sales growth will accelerate in 2006, with revenue rising to $242.8 billion, up 4.3 percent from 2005. In June, the SIA revised its annual chip sales forecast upward by 6 percent for 2005, to a record $226 billion. Previously, the trade association predicted sales in 2005 would be relatively flat--totaling about $213 billion--following a record sales year in 2004.