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Panic over: boom times ahead for chip biz

Increased production to push up prices, apparently

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The world's chip makers will experience double-digit sales growth next year, market watcher Advanced Forecasting (AF) said yesterday.

That prediction is in marked contrast to iSuppli's forecast of 4.3 per cent growth next year, which it also made yesterday.

AF reckons sales will pick up significantly during the first half of the year, driven by demand for chips that will be used in communications kit, consumer electronics and PCs.

The gain is predicated on increasing manufacturer capacity utilisation in turn pushing up average selling prices and thus driving up revenues. AF said capacity utilisation reached 89 per cent in Q2 2005, though it admits that foundries are now running at 83 per cent of maximum output capacity. Both figures are well below the year-ago totals.

AF points to rising unit shipments, which it describes as "strong and strengthening".

“Already IC units have increased 14 per cent since January 2005, from 8.39bn to 9.53bn, which is a 24 per cent increase from their 7.7bn peak in 2000 and an 80 per cent increase from the 5.3bn minimum point of the 2001 recession,” said Rosa Luis, AF's director of marketing and sales, in a statement. “At the same time, IC revenues declined 2.5 per cent since January 2005, forcing overall ASP to decline.”

Yesterday, iSuppli criticised manufacturers for increasing production - in the way AF describes - despite what it sees as falling demand and tumbling prices. It pointed to the effects of rising energy costs dampening demand going forward, and forecast flat growth in Q4 followed by a weak H1 2006.

iSuppli also forecast double-digit growth, but the researcher reckons it's not going to kick in until 2007. ®

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