June 3, 1998 #21
GLOBAL SEMICONDUCTOR SALES TO DECLINE 1.8 PERCENT IN 1998; STRONG GROWTH OF 17-19 PERCENT FORECAST FOR 1999-2001
Complete Summary Available on New SIA Web Site
SAN JOSE --- An across-the-board drop in semiconductor sales during the first quarter --- triggered largely by Asia's economic problems ---suggests that year-end global sales will decrease 1.8 percent to $134.6 billion, the Semiconductor Industry Association (SIA) reported today. Sales are expected to pick up steadily during the second half of 1998, however, and are projected to exceed the industry's historical growth rates of 17 percent or more in 1999, 2000 and 2001.
"The financial turbulence in Asia and other market changes has crimped the expected expansion of global chip markets in early 1998," said SIA President George Scalise. "Thanks to the unprecedented growth of Internet usage, we now expect the industry's expansion to occur in 1999 as semiconductor growth rates return to their historical averages of 17 percent or more."
The midyear forecast was prepared by analysts for the World Semiconductor Trade Statistics (WSTS), a global organization representing 73 semiconductor companies. According to the WSTS, global sales will increase 17.2 percent in 1999 to $157.7 billion, 18.5 percent in 2000 to $187.0 billion, and 18.9 percent in 2001 to $222.3 billion.
"The U.S. semiconductor industry has undergone phenomenal growth during the 1990s and added more value to the U.S. economy than any other manufacturing industry," Scalise said. "At the same time, we are aware of the cyclical nature of the industry and the short-term impacts those cycles have on our long-term growth.
"But with Internet use doubling every 100 days, and Internet commerce about to explode, we can already see the beginnings of the next growth cycle for semiconductors and consumer electronics," Scalise continued. "The new growth cycle will be driven by more versatile microprocessors, digital signal processors, systems-on-a-chip, communications and networking devices, and the popularity of new consumer products such as digital cameras and digital video discs."
Worldwide semiconductor sales increased 4 percent in 1997. Industry-wide expectations for a strong growth year in 1998 ran aground during the first weeks of the new year, when sales slowed in all markets. By the end of the first quarter, sales had declined 10.2 percent in the America's market, 4.9 percent in Europe, 11.5 percent in Japan and 9.7 percent in Asia Pacific (from the fourth quarter of 1997). Chip sales are improving in the second quarter --- but not at a rate to offset the reduced orders from the previous quarter.
Japan, Korea and other South East Asian countries continue to show the effects of the currency crises that surfaced in late 1997. The depreciation of the Yen against the U.S. dollar, for example, accounts for approximately $1.7 billion of the expected $3 billion decline in Japan's semiconductor market. The economic uncertainties in Korea, meanwhile, not only impacted sales in that country, but have made buyers cautious in other markets. One year ago, industry forecasters expected sales in the Asia Pacific market to increase 24 percent in 1998. Today, the WSTS projects that Asia Pacific sales will grow 3.2 percent in 1998.
The gradual slowing of the global economy --- along with the continued pricing problems and oversupply of memory chips --- is also contributing to reduced semiconductor revenues in 1998. Even though the U.S. economy is still strong, chip sales in the America's market are expected to fall nearly $3 billion short of the market's $45.8 billion total for 1997.
Here are other highlights of the mid-year 1998-2001 WSTS forecast:
After declining 21.2 percent in 1997, DRAM sales are expected to drop another 26.6 percent in 1998 to $14.5 billion, the WSTS said. The inventory over-supply problem, now in its third year, is expected to dissipate late in 1998. As supply comes in line with demand, DRAM revenues will climb 26.7 percent in 1999, 35.4 percent in 2000 and 35 percent in 2001.
Due in large part to the popularity of sub-$1,000 personal computers and reduced margins, microprocessor sales will only duplicate 1997 sales, which represented a 26.6 percent increase from 1996. Year-end sales should be $23.4 billion, with 42 percent of all sales occurring in the America's market. Strong growth should resurface in 1999 as microprocessor sales increase 25.3 percent to $29.4 billion. Sales are expected to increase 19.4 percent in 2000 to $35.1 billion and 18.6 percent in 2001 to $41.6 billion.
Digital Signal Processor sales continue to expand at exceptional rates. DSP revenues grew 39.2 percent in 1996, 33.6 percent in 1997, and are expected to grow by another 23 percent in 1998 to $3.9 billion. This pace will continue for the foreseeable future, with sales increasing 27.5 percent 1999, 25.6 percent in 2000 and 28.2 percent in 2001. DSP sales in 2001 will exceed $8.1 billion.
Analog products, used in many telecommunications devices, are showing the best returns of 1998, with sales expected to increase 8.3 percent by year's end to $21.4 billion. Sales are anticipated to grow by another 15 percent in 1999 to $24.6 billion, followed by 16.9 percent and 17.7 percent growth in 2000 and 2001, respectively.
The MOS memory market, which includes DRAMs, should decline 17.5 percent this year to $24.9 billion in sales. Sales should increase 19.4 percent in 1999 to $28.9 billion and jump by more than 25 percent in 2000 and 2001. Sales in 2001 should exceed $46.5 billion.
The MOS Micro market, which includes microprocessors and digital signal processors, should grow 2.1 percent in 1998 to $48.7 billion. Sales will increase dramatically in 1999 by 21.9 percent to $59.4 billion, and then be followed by near-20 percent sales growth in both 2000 and 2001.
MOS Logic sales are expected to decrease 1.1 percent in 1998 to $20.8 billion, then increase 14 percent in 1999 to $23.7 billion. Sales increases of 15.7 percent and 14.9 percent are projected for 2000 and 2001.
Geography is also making a difference in 1998 sales. Asia Pacific, which had been the hottest emerging sales market, will grow 2.8 percent to $31.0 billion this year, after growing 9.6 percent in 1997. Europe will show the best single-year gains, with sales increasing 5 percent to $30.5 billion by year's end. In the America's market, sales will decrease 4.1 percent to $43.9 billion. In Japan, sales will reach $29.1 billion, down 9.2 percent from 1997's $32.0 billion.
Between 1999 and 2001, sales should improve in all regions. Sales in the America's market are expected to grow by more than 18 percent per year, rising from $52.2 billion in 1999 to $73.5 billion total in 2001. Europe's growth should follow suit, increasing from $36.1 billion in 1999 to $51.5 billion in 2001. Japan, now the world's fourth largest market, should enjoy double-digit growth rates and reach $41.6 billion in sales by 2001. Asia Pacific should experience average growth of more than 20 percent and hit $55 billion in sales in 2001.
Global Consumption in Major Markets
Worldwide Sales
Market Sector 1998 2001
America's market 32.7% 33.1%
Japan market 21.6 18.7
Asia Pacific market* 23.0 25.0
European market 22.7 23.2
* Includes Singapore, Korea, China, Taiwan, India
Growth of Global Sales 1980-2001
Year Global Sales Annual Growth
Rate
1980 $13.1 billion 27.2 %
1985 22.1 16.8
1990 50.5 1.6
1995 144.4 41.7
1997 137.2 4.0
1998 134.6 -1.8
1999 157.7 17.2
2000 187.0 18.5
2001 222.3 18.9
Source: WSTS 1998
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