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The Outlook: Six Percent Increase in 2005 at Record Levels and Continued Growth in 2006

Published: 12/12/2007 5:44:07 PM  Come From: Economic  Click Count:911


      Revenue growth in the semiconductor industry in 2005 will be up 6percent from 2004. This is a usual trough year of the cycle, particularly in contrast to 2001's 32 percent revenue decline. Without the volatile memory sector, which will fall 6.3 percent in 2005, semiconductor sales would actually rise 9.5 percent in 2005. 2006 will see an acceleration in growth to 8.8 percent and revenue of $246 billion. In 2007, the industry will exceed $250 billion in revenues for the first time, posting 11.0 percent sequential growth in sales to $273 billion followed by 13.5 percent growth to $303 billion in 2008. This is a remarkable advance for an industry of this size.

      Three factors are contributing to the shallow trough of 2005: inventory management, capacity, and resilient end markets.

      As soon as excess inventory began to accumulate in the supply chain in the second quarter in 2004, companies throughout the electronics supply chain reacted effectively to reduce inventories, in contrast to the inventory accumulation of previous cycles. Instead of the ten quarter resolution of the previous cycle, excess inventory is out of the supply chain within three quarters, ending in the second quarter of 2005. The lack of inventory is in addition to normal seasonality for the outlook for stronger growth in the second half of 2005.

      Capital spending has also been restrained in this cycle, representing 21 percent of sales in comparison to 2000's 30 percent spending level.

      In contrast to 2001, end market unit growth will largely slow in 2005, rather than decline, with some pockets of strong growth, as follows:

Consumer Market

      In the consumer area, with the emergence of Digital TV-which contains higher semiconductor content than standard TV's-unit sales should rise 65 percent in 2005, above the 47 percent growth of 2004.

Communications Market

      In the wireless communications market, unit growth in handsets will slow from 30 percent in 2004 to 13 percent in 2005, still driven by 2.5G and 3G handsets, whose semiconductor content is 25 percent higher than previous generations, to support digital cameras, color displays, and wideband data capability.

PC Market

      The personal computer market should slow to 10 percent unit growth from 14 percent in 2004, as corporations complete the Y2K upgrade cycle, but consumers continue to adopt new applications such as streaming video and broadband connectivity.

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