Dataquest: Chip industry back on a roll

Dataquest: Chip industry back on a roll

Worldwide semiconductor sales are expected to grow 14.1 per cent this year to $US155 billion, the first year of double-digit growth for the industry since 1995, according to a quarterly report on the subject from research firm Dataquest.

The chip industry has watched its historically strong growth rate slip in recent years thanks to a number of factors, notably a sharp decline in memory chip prices caused by an oversupply. The financial crisis in Asia, combined with plummeting PC prices, also put a squeeze on the industry.

With memory prices stabilising and the use of the Internet, cellular phones and personal computers soaring around the globe, sales will recover this year and remain at double-digit growth until 2002, according to Dataquest.

Chips used in communications gear, personal computers and consumer electronics equipment will account for about two-thirds of worldwide sales, Dataquest said. Chips used to control functions in automobiles will also continue to be a significant driver.

The underlying trends fuelling the growth are the emergence of the "digital home", coupled with the explosion in global communications, increased personal mobility and the accompanying use of handheld computers, cell phones and pagers, and the rise of electronic commerce, said Dale Ford, director of Dataquest's worldwide semiconductor applications group. By 2003, global sales will have reached $US250 billion, Dataquest estimates.

The recovery in prices for DRAM (dynamic random access memory) chips, which provide the main memory in personal computers, will lead the growth charge. DRAM sales are projected to generate $48 billion by 2003, more than double their projected value in 1999.

"We're already starting to see DRAM prices firm up, and we're seeing that over-capacity issues may be sorted out even sooner because of [last month's earthquake] in Taiwan," Ford said.

A shortage in DRAM chips early next year will cause prices to stabilise, leading to a surge in revenues that will peak in 2002, Dataquest predicts. Oversupply will return to the DRAM market in 2003 as manufacturers increase capacity to match demand, causing revenues to decline again, Dataquest said.

The market for ASICs (application specific integrated circuits) will be another growth driver, with sales reaching $34 billion by 2003, up from a projected $17 billion in 1999. Sales of analog products and microprocessors should see stable growth, Dataquest predicts.

On the whole, the earthquake caused only short-term supply issues for the semiconductor industry, and any hiccups are likely to be resolved quickly.

The research firm expects the Asia-Pacific, which is emerging from its financial crisis, to be the fastest-growing region in the world for chip sales both short- and long-term, with revenue forecast to increase 17 per cent in 1999, to $36 billion, and climb steadily to $61 billion by 2003.

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