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Slowing H2 chip sales to hit 2005's growth - report

Cause: softening in notebook PC and mobile phone demand

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Market watcher iSuppli last night cut its forecast for 2005's global chip sales growth citing a slowdown in H2 2004 growth.

While H1 2004 sales are 31.4 per cent higher than the year-ago half's total, H2 2004 year-on-year growth is likely to come in at just 20 per cent, iSuppli reckons.

H2 2003's sales were higher than H1 2003's. So too will H2 2004's total come in above the figure for H1 2004, but crucially the rate of increase is slowing.

To be fair, that's something all chip market analysts appear to agree on, and that 2005's growth will be somewhat lower than 2004's. But iSuppli now believes that H2 2004 growth will slow more than it previously anticipated, with a knock-on effect on 2005's numbers.

So, from a 2005 growth forecast of 11.8 per cent, iSuppli is now citing 9.6 per cent as its target. That contrasts with the Semiconductor Industry Association's already more conservative forecast of 4.2 per cent growth.

"The rapid decline in semiconductor industry growth is due to softening prices for chips as well as to a slowing in the electronic equipment markets, which drive chip sales. Revenue growth in the electronic equipment market will slow to 5.8 per cent in 2005, down from 9.8 per cent in 2004," the researcher said.

"Two important products are the major culprits behind the equipment and chip slowdown: mobile phones and notebook PCs," it added. "Mobile-phone unit shipment growth, which has been soaring during the past two years, will slow to only five per cent unit growth in 2005. Meanwhile, notebook PC unit shipment growth will drop to ten per cent in 2005, half the 20.1 per cent increase in 2004."

For 2004 as a whole, iSuppli is forecasting sales of $228.3bn, up 25.4 per cent on 2003's total. Fellow market watcher Gartner recently upped its 2004 total to $226bn, an increase of 27.4 per cent over its figure for 2003. Gartner believes 2005 will see 15 per cent growth over 2004 - higher than the 13.3 per cent it forecast in Q1 this year.

Further ahead, iSuppli said it now believes 2006 will see just twp per cent growth over 2005, compared the SIA's prediction of a 0.8 per cent decline. ®

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