Gartner: Chips are up for 2005

Gartner: Chips are up for 2005

Gartner raised its forecast for global semiconductor industry revenue growth. The analyst group gave several reasons for the revision including signs of stronger than expected sales of personal computers and mobile phones.

Chip industry revenue would probably grow 5.9 per cent this year to $US232.9 billion, up from a previous estimate of 3.4 per cent growth. However, the revised forecast is still a drop from the semiconductor industry's 23.4 per cent growth last year, and 2005-2007 were likely to be "three years of sluggish growth" before chips took off again in 2008, a vice-president of research in Gartner's semiconductor division, Andrew Norwood, said during the company's 11th annual Semiconductor Roadshow in Taipei.

"It's very strange to see three years of sluggish growth [due to the boom-bust nature of the chip industry]", Norwood said.

Normally, the chip industry ran in fairly regular three-year cycles of one or two strong years followed by a downturn caused mainly by chip companies building too many new factories, he said. Companies tended to invest more in expensive new chip factories during upturns, until too many came online and caused a glut.

Memory chip production, out of step with the rest of the industry, was the reason for the strange pattern that Gartner predicted for the semiconductor industry over the next few years, Norwood said.

Makers of commodity memory chips, mainly dynamic RAM (DRAM) and NAND flash memory, have not invested in new factories at a normal pace because of heavy losses during the previous downturn. They had become more cautious, Norwood said.

Normally a strong year such as 2004, when memory chip revenue grew 43.4 per cent to $US48 billion, would be followed by a downturn. Instead, the segment would not see a downturn until 2007, Gartner predicted, after 3.2 per cent revenue growth this year, and 0.6 per cent growth in 2006. In 2007, memory chip revenue would decline about 9.6 per cent, Gartner said.

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