2001 is worst year in chip history, Dataquest analyst says

JUNE 20--Bryan Lewis, director and chief analyst of ASICs and worldwide research with market-research company Gartner Dataquest Inc. (San Jose, CA), believes 2001 will be the worst year ever for the chip industry, with no relief until 2002 or 2003.

Jun 20th, 2001

JUNE 20--Bryan Lewis, director and chief analyst of ASICs and worldwide research with market-research company Gartner Dataquest Inc. (San Jose, CA), believes 2001 will be the worst year ever for the chip industry, with no relief until 2002 or 2003. Lewis warned Dataquest's chip forecasts may be revised again before the year is out.

Dataquest is currently predicting a 16.8% drop in worldwide semiconductor revenues. "(For) the semiconductor industry in 2001, it looks like we're heading into a storm," Lewis said. "The market has completely changed in the last month."

Lewis cited recent announcements from Nortel Networks Corp., Nokia Corp., Qualcomm Inc., and Cisco Systems Inc. as illustrating things are only going to get worse. It will be several more months before the extent of the downturn is fully known, and with that, whether or not Dataquest's worst case scenario will be realized, Lewis said.

"What's not being taken into account is that what was once five chips on a circuit board is now one chip on a circuit board," Lewis said. "But is that five chips worth of value recreated in that one chip? The answer is no. That one chip does not produce five times the revenue."

Lewis said by 2002 ASSP designs will eclipse ASICs. Lewis predicts foundries will produce more than 50% of ASICs within 10 years. The ASIC industry is transitioning, with foundries no longer lagging but instead becoming the process leaders, as outsourcing becomes increasingly common and Lewis said he believes the ASIC industry is moving toward a fabless model.

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