Semico Research forecasts 23% growth in semiconductor industry in 2003

Feb. 25, 2003
FEBRUARY 25--Semico Research (Phoenix, AZ; sees indications that the economy is poised for a strong recovery in 2003.

FEBRUARY 25--Semico Research (Phoenix, AZ; is forecasting 23% growth for the semiconductor industry in its recently released industry forecast. Published in the monthly Semico Tracker Newsletter, the forecast has been adjusted down by two percentage points from the fourth-quarter 2002 forecast, due to lingering uncertainties in the market.

Semico sees indications that the economy is poised for a strong recovery in 2003. Consumer spending and the housing market, key leading indicators, are outperforming expectations. Semico expects first-quarter GDP will be up from fourth quarter 2002 by 3%--4%.

Despite better-than-expected economic outlook, the semiconductor industry continues to struggle with soft pricing and weak demand. Semico sees pent-up demand in the IT sector for long overdue hardware, software, and infrastructure upgrades. However, with the specter of war in Iraq looming on the horizon, corporate leaders continue to delay spending decisions and investments, adversely affecting a recovery in the semiconductor sector. Despite delayed IT and corporate spending, 2002 saw 14.3% growth in unit demand, but only 1.3% revenue growth, due to aggressive pricing by semiconductor vendors positioning for market share.

Semico expects prices to continue to be weak in the first quarter, but firm up throughout 2003. One key driver for this recovery will be growing demand in the Asia-Pacific market, particularly mainland China, which is rapidly becoming both a key consumer and producer of semiconductor products. In addition, leading-edge manufacturing capacity currently stands at 90% utilization while the high-volume sweet spot is at 80%. With demand continuing to grow through 2003, Semico anticipates that capacity will once again become slightly constrained, helping drive up ASPs by changing the supply and demand dynamics.

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