Chip sales to fall 14% in 2001

But massive growth coming next year. Fingers crossed...

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Worldwide chip sales will start to grow again in the second half of the year, preventing a 14 per cent decline in revenues from becoming an utter disaster.

So says the Semiconductor Industry Association, which issued its latest proclamation on the subject yesterday.

Overall, 2001 will see a drop in sales of 14 per cent on last year's total, down to $175.5 billion. That's not so far off the World Semiconductor Trade Statistics' recent prediction of a 13.5 per cent decline, with revenue falling to $176.69 billion from last year's $204.39 billion. US-based market watcher Semico Research puts 2001's decline at 12 per cent. Gartner, meanwhile, puts the fall at 17 per cent.

The WSTS is anticipating single digit growth through the next few quarters and, given the similarity of its final figure for 2001, so does the SIA.

Looking ahead, the SIA bullishly expects the global chip market to hit $283 billion by 2004, growing 20.5 per cent next year and 25.2 per cent in 2003.

Here the SIA and WSTS diverge - the latter is expecting only 13.9 per cent growth next year. Semico, by contrast, puts 2002 growth at 25 per cent.

It all depends on the extent to which demand for networking products rebounds. That was the main driver of 2000's massive 37 per cent (the SIA's figure) year-on-year growth. The SIA optimistically believes that side of the business will recover - the WSTS is less convinced.

Certainly the networking business isn't going to rebound through 2001 and some way into 2002. Cisco, for one, isn't too confident at the moment, and with its biggest customers, the telcos, being hard hit too, the chip makers' customer chain doesn't look too strong.

And inventory levels remain very high. EBN cites Fairchild Semiconductor CEO Kirk Pond as claiming that inventory levels fell $2 billion to $13 billion between Q4 2000 and Q1 2001. That's a big fall, to be sure, but only a fraction of the total. At that rate of shrinkage it's going to take chip customers some time to clear through their mountains of unused parts. ®

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Global chip biz to decline 13.5% during 2001


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