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Chip sales to grow 23% in 2002, says analyst

Driven by cash-rich consumers

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Consumer spending, one component of the economy that has continued to grow (so far) despite the recession, will lift the semiconductor industry out of the doldrums next year.

So says US-based market watcher Semico Research, which reckons 2002 will see chips sales reach $200 billion, up 23 per cent on the company's estimate of this year's figure.

Much of that growth will come in the latter part of the year, with the curve flat during Q1, rising by single percentage points during Q2 and Q3, before rocketing up in Q4. In other words, the business is going to have to wait some time before it experiences that headline figure of 23 per cent growth.

Of course, that leaves plenty of time for recession-induced uncertainty to creep in and for consumer spending to fall too. Semico rightly noted that consumer spending has been good this year, buoyed up by house-price inflation, low interest rates and, in the US, tax cuts. How long that will last, as job cuts bite, is open to question.

Even so, the chip industry's circumstances are improving. According to Semico, inventory levels have now fallen by at least $25 billion (as of the start of Q3), and the inventory-to-sales ratio is falling, suggesting that demand at the end of the sales chain is beginning to filter down to the base suppliers. That's good news, says Semico, for indsutry players anticipating improved sales next year.

And for the two beyond that. Growth will continue through 2003 and 2004, Semico said, but expect it to dip in 2005. By then, the business should be worth arounf $302 billion. ®

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