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No chip sales boom 'til 2003, says market researcher

Only three per cent growth next year

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Market researcher Gartner Dataquest has followed up last month's dismal forecast for the world's memory manufacturers with a marginally more optimistic outlook for the semiconductor business as a whole.

Maybe we should say 'less pessimistic' rather than 'more optimistic', since Gartner is predicting growth of just three per cent next year, netting chip makers total sales of $152 billion. This after sales fell 35 per cent this year to $147 billion.

The prognosis for 2003 is much better, with sales rising 30 per cent, Gartner Dataquest reckons. Driving that growth will be recovered demand not only for PCs but for mobile devices, along with communications and networking infrastructure products, on the back of the roll-out of third generation cellular networks.

It was the drop in demand for mobile products that fuelled the decline in the communications market, which, in turn, tipped the chip business into recession in the first place. So it's ironic that that very sector will lead the chip market's recovery.

Eventually, at any rate. Gartner Dataquest's figures suggest that, for most companies, 2002 isn't going to be any better than 2001, and that we're not going to see any significant upturn in the PC and PDA markets.

"The slowdown in capital expenditure in 2001 will likely spill over into 2002, resulting in supply-side tightness in 2003, when a stronger demand side is expected to have returned to the market,'' said Richard Gordon, principal analyst for Gartner Dataquest's worldwide semiconductor group.

"Improvements in the macroeconomic environment will likely fuel a PC replacement cycle and a recovery in the wired communications sector,'' he added. "In addition, the roll-out of 2.5 generation and 3G cellular will be well under way in the 2003 timeframe, boosting demand for silicon-rich handsets.'' ®

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