The semiconductor industry will see an upswing in several areas in the fourth quarter of 2003, according to three separate research reports.
Analysts say an underlying demand and actual IC [define] shipments are starting to converge. Because of its cyclical nature, however, the chip sector continues to be plagued by an uncertainty of when the current slow recovery will transform into a stronger one. At this point, forecasters say the beginning of the semiconductor upsurge is in sight although layoffs persist and budgets remain constrained.
Research firm Advanced Forecasting Director Rosa Luis says the semiconductor industry is entering a significant recovery period. It won’t be the steep growth experienced during the 1999 to 2000 boom period, but it will be strong nonetheless.
“The next stage of the recovery was set in motion by factors we measured a year and half ago,” Luis said in a statement. “Knowing the timing of that turning-point is crucial in order for companies to be able to prepare. Advanced Forecasting informed its clients that it would occur during Q4-2003, and we stand behind that forecast.”
Advanced says several trends in the semiconductor industry, such as the expansion of foundries in Asia and increasing IC unit sales that reached 7.28 billion in May 2003, only 5 percent below its peak in late 2000, point toward a robust recovery.
A foundry expansion is certainly in the works, according to research firm Gartner. After two difficult years, analysts with the Stamford, Conn.-based company said Wednesday that worldwide semiconductor capital equipment spending is poised to return to positive growth in 2003.
Gartner is forecasting spending in the sector to total $29.9 billion in 2003, a 7.9 percent increase from 2002. That certainly beats last year’s 37.9 percent decline. All other segments of the semiconductor capital equipment market are on pace for increased spending in 2003, staving off revenue declines of at least 21 percent in 2002.
“On a regional basis, Japanese companies are most aggressively raising spending this year with a possible increase of 25 percent to 30 percent over 2002, funding its newly restructured ventures,” Gartner managing vice president Klaus-Dieter Rinnen said. “DRAM [define] has been strong so far, led by Samsung’s aggressive plans to increase spending by more than 50 percent over last year. Foundry is the wild card. We expect foundry growth to be flat in 2003, but this can change in the blink of an eye.”
According to Gartner predictions, for the first time in history, 300-mm equipment sales will account for the majority of equipment sold. Albeit, following last year’s strategic investment into this technology, the annual expansion is slowed compared with prior years. Going forward, 300-mm sales should grow to account for over 70 percent of all equipment revenue in the peak of 2005.
Driving this is the demand for the chip scale package (CSP) and ball grid array (BGA) packages, along with the continued transition to flip chip for higher-end, performance-based applications.
Still, despite indications toward the positive, the general feeling is that the recovery cannot take place without the “killer app.”
“The existence of a ‘killer app’ isn’t required for a recovery to take place,” says Luis. “The underlying demand for ICs is the required driver which allows ‘killer apps’ to develop and be successful.”
That so called “underlying demand” may be answered by wireless. The Wi-Fi [define] revolution has helped a recent spark in sales of wireless LAN (WLAN) chipsets and the prediction for the short-term is looking mighty favorable, according to analysts.
A report issued by Charlottesville, Virgina-based Communications Industry Researchers (CIR) claims that the market for WLAN [define] chipsets will expand from $938 million in 2003 all the way to $1.7 billion in 2007. Key drivers for this growth will be the ability of WLANs to let business users and consumers avoid the high costs of cabling and of moving PCs attached to conventional LANs. WLANs in the form or public or private
Hotspots are also popular because they give business travelers broadband access on the fly.
The survey reveals that OEMs/ODMs place a high value on WLAN chipsets that offer enhanced transmission range and receiver sensitivity.
“That could be an important source of competitive advantage for smaller chipset manufacturers trying to compete with the likes of Agere, Atheros, Broadcom, Intel, Intersil and Texas Instruments,” CIR said in its report.
Analysts with CIR also said they expect a significant demand from consumers for WLAN-capable flat-screen displays that connect to DVD players or HDTV feeds via a wireless connection. By 2007 CIR expects the market for video-enabled WLAN chipsets to be about $350 million. Enhanced security and switching needs of the business WLAN market will also be hot in the next four years.
“Chipsets for WLAN switching hubs alone will be worth almost $160 million by 2007,” the analyst group said.
The rosy predictions for Q4 growth in 2003 certainly mesh well with estimates from the World Semiconductor Trade Statistics organization and Semiconductor Industry Association (SIA).
The SIA released its midyear 2003-2006 forecast, projecting a compound annual growth rate of 9.8 percent over the forecast period. Beyond 2003, the trade group expects worldwide sales of semiconductors to hit 16.8 in 2004, 5.8 percent in 2005, and 7.0 percent in 2006. The SIA expects industry sales to grow from $141 billion in 2002 to $205 billion in 2006.
The three-month increase in chip purchases may help support recent analyst predictions that 2004 will be the banner year for companies to upgrade their PCs and servers.
Gartner analysts are a little more aggressive, expecting a PC upgrade cycle to emerge in the second half of 2003, although it may start out slowly.
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