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Researcher halves 2005 chip biz growth forecast

Weak Q4 followed by 'very slow' H1 2006

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Market watcher iSuppli has cut its 2005 global chip sales forecast, halving its year-on-year growth prediction from 5.9 per cent to just 2.4 per cent.

The upshot: the world's chip makers will sell $232.7bn worth of kit this year, rather than the $240.6bn iSuppli suggested earlier this year.

iSuppli noted it reckons next year's growth would come to 4.3 per cent, better than the 3.9 per cent it previously predicted. However, the slowdown this year means the chip industry is still worse off, bringing in $242.8bn in 2006, well below the $250bn it would have netted on the basis of iSuppli's original forecast.

The chink of light in the gloom is the prospect of much better, double-digit growth in 2007 through to 2009.

It's not hard to see why iSuppli has lowered its forecast: rising energy prices, potentially exacerbated - albeit to an unknown extent, the researcher admitted - by Hurricane Katrina.

To that, the researcher adds the "growing excess of manufacturing capacity" - demand is slowing and prices tumbling, iSuppli said, but manufacturers are increasing production. Q3 production will be 3.1 per cent up on Q2's figure. Capacity utilisation will rise from 83 per cent to 86 per cent.

“Although a strong third quarter is expected," said Gary Grandbois, one of iSuppli's principal analysts, "this will be followed by a flat fourth quarter, which will result in four per cent growth in the second half of the year... leading into a very slow first half for 2006." ®

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