Recovery of semiconductor industry on track: Gartner

The worldwide semiconductor market will reach $173 billion in 2003 - an 11.2 percent increase over 2002, forecasts Gartner Inc. In 2002, worldwide semiconductor revenue totaled $156 billion.
"Noteworthy improvements in market conditions during the last few weeks confirm that the industry is continuing its recovery as expected and is about to enter a more accelerated growth phase. This observation is in line with our long-standing assumption of a three-phase recovery in the market," said Richard Gordon, research VP for Gartner's semiconductor research group. "While many industry watchers have been revising down their forecasts recently, we have been predicting growth of around 10 percent for 2003 since the fourth quarter of last year. Our forecasting consistency is a testament to our rigorous methodology and comprehensive applications-based forecast database."

Gartner analysts said that in front-end semiconductor manufacturing, silicon demand is increasing, overall wafer fab utilization now exceeds 80 percent and foundry wafer pricing has firmed up. In packaging and assembly, overall utilization rates continue to increase on a monthly basis and leading-edge capacity has become tight as the demand for advanced packaging solutions grows.

Meanwhile, in device markets, inventories are back to normal levels, pricing has stabilized, and in some cases, there are shortages of critical components, Gartner says. In application markets, on the other hand, the digital cellular handset market remains robust, demand for digital consumer electronics products has not waned and there are early signs that the corporate PC replacement cycle has begun.

"It is becoming increasingly likely that the long-awaited corporate PC replacement cycle will be characterized by incremental increases in IT spending spread over a more prolonged timeframe than we have seen in the past," Gordon said. "While this trend would underpin a sustained semiconductor recovery, it may act to temper headline annual revenue growth. Excess capacity in the telecommunications sector also remains a concern that could postpone the return and inhibit the level of telecommunications industry capital spending in the medium to long term."