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Chip industry heads for bounce back

Dataquest revise figures

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The latest slump in the semiconductor industry has hit beyond the usual manufacturing base of Intel et al and reached right out to the UK with its community of specialist chip designers - the effects of which have been devastating. With redundancies, office and plant closures this has been, "...the worst recession in the semiconductor industry."

It all started, inevitably, with the dot com and subsequent tech market collapse. The semiconductor industry was hammered as demand for PCs slumped, the market was flooded with secondhand servers and spending dried up. In 2001 revenues going into the semiconductor industry fell by 32% (over 2000 revenues) down to just $152.5 billion. 2002 has shown signs of recovery, or at least a slow down in losses. It's currently predicted to grow revenues by only 0.5% over 2001. That's not a lot of growth.

But hope is on the horizon. Dataquest has released a new report which points to a substantial upturn for the fortunes of the chip designers and manufacturers. The company forecasts 2003 will see a return to double digit growth and that the chip industry can expect revenues of $171.8 billion flooding back in. This will give the industry some much-needed breathing space.

Several factors areinvolved with this re-worked prediction: previous predictions were more pessimistic. Top of the list, or at least one of the key drivers, will be the up and down PC market. Dataquest reckons the corporate PC replacement cycle is long overdue, having been put on hold for at least a year because of the economy. This will buoy business considerably.

Wireless is the other big driver for the semiconductor industry. A raft of new products gradually creeping into the market, will rely on a new batch of deliverables from the chip manufacturers.

So, tt's all down to another upgrade cycle. As consumers ditch the old 2G phones and reach instead for 3G and phones with colour screens and cameras, chip manufacturers reap the returns.

2003 will see the start of this whole upgrade cycle, which is expected to happen across a broad range of electrical appliances, and is therefore seen as something of a transition year for the semiconductor industry. 2004, Dataquest predicts, is when the real action will start. But we don't have any figures for this yet.

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