NOVEMBER 4--According to In-Stat/MDR research (www.instat.com/cls-semiconductor.asp), although the recovery of the semiconductor industry has slowed, it has not completely stalled, and it is expected that after a brief pause the recovery will continue during 2003 and into 2004. Thanks to slightly stronger growth than was expected in the first half, 2002 now appears to be on track to end just about even with 2001 at $139 billion in revenue--give or take a billion or two. The first two quarters of 2002 saw sequential revenue growth bringing second-quarter revenue 12% above the quarterly low point that was reached in the final quarter of 2001. Growth will be slower in the third and fourth quarter, but whether 2002 ends slightly above or slightly below last year's number, the precipitous decline has ended, and the industry is on its way back up.
Although the communications markets took most of the blame for the initial decline, it is the sluggish computer markets that are slowing the recovery. Computers still account for nearly 50% of all semiconductor sales and without strength there, the recovery will be slow.
Because 65% of microprocessor (MPU) revenue and 80% of DRAM revenue comes from the computer sector, the data on these two IC categories are a reasonable proxy for the overall computer market. Revenue for MPU plus DRAM rose by 25% from the fourth quarter of 2001 to the first quarter of 2002, but that growth slowed to 9% from first-quarter to second-quarter, and the trend in third quarter is for still slower growth. Sales of all other semiconductors however fell by 2% from fourth-quarter 2001 to first-quarter 2002, rose by 9% from 1st quarter to second quarter and continue the upward trend. This growth in the noncomputer segment is consistent with In-Stat/MDR's research, which shows strength in many of the major consumer, LAN, and wireless markets.
Based on a slow first half followed by stronger growth in the second half, In-Stat/MDR foresees semiconductor revenues of $164.2 billion in 2003, up 18.1% from 2002. 2004 is also expected to be an up year with the industry struggling to bring new capacity on line. But during 2005, an over-capacity driven revenue downturn will begin kicking off the next down cycle.