JULY 1--Forward Concepts, in its latest DSP Market Bulletin, reports continued DSP shipment growth in the first quarter of 2003 is an unusual situation. That is because the DSP market, like most other semiconductor markets, usually exhibits a drop in first-quarter shipments. But vendors tend to ship everything in the fourth quarter to improve their annual revenue figures. And a slump in shipments the following quarter is usual.
Q1/03 shipments were up almost 5% over Q4/02 and the slump didn't hit until early in the second quarter, with DSP shipments dropping almost 10% sequentially in April and another 1% in May. But, the good news is that DSP shipments are running almost 40% ahead of last year's first five months.
Shipments to China now dominate the DSP market, and this may be the basis for a permanent seasonal shift in selected semiconductors, including DSP. Wireless is the largest market for DSP chips (almost 65% of shipments last year), and China is the largest market for wireless.
Whether or not there is an overall pattern change, we can attribute part of the second-quarter shipment drop to both SARS and inventory glut. Both have a negative effect on wireless and DSP revenues. May has been the peak month for cell-phone purchases in China. But SARS resulted in a dramatic drop in sales that month, resulting in inventory glut. In the West, the stall of 3G cellular rollouts in Europe has the effect of slowing infrastructure DSP growth there, as well.
First quarter shipments looked very good, but both Motorola and Texas Instruments have announced that their total Q2 revenues will be down, for the reasons cited above. Those events, coupled with the fact that the worldwide economy is still in a slump, Forward Concepts is lowering its earlier 2003 prediction of 20% DSP growth to 15%. That should, however, be compared to our overall semiconductor growth forecast of 7% for 2003. Because of the slower uptake on 3G cellular, we've lowered our earlier optimistic 2004 forecast of 33% to the 30% level. Nevertheless, we still predict the programmable DSP market to continue outpacing the overall semiconductor market, with a compound annual growth rate of 23.5% to the $14 billion level in 2007.
For the first five months of 2003, shipments of DSPs to the consumer market grew from 6.4% to 10.2% of the market. That should be great for the vendors of DSPs to the consumer market . . . except for the fact that average selling prices to that market segment dropped over 50% from last year's level, as presented in the next table. Compare the DSP price changes with the 4.2% drop across all monolithic integrated circuits over the same period.
