Semiconductor industry to grow 37% in 2000

By Staff -- Purchasing, 11/16/2000

Semiconductor sales will grow 37% to $231.6 billion with every major component achieving double-digit growth in 2000, according to market researcher Dataquest.

"It has taken the industry five years to return to the strong revenue growth achieved in 1995, when the industry grew almost 38%," says Mary Olsson, principal analyst for Gartner Dataquest's worldwide semiconductor group. "Yet, despite the growth resemblance between 1995 and 2000, we do not believe 2001 will be a year of changing business conditions as it was in 1996. In 2001 the chip industry will grow 27.5%

However the growth will decline substantially in 2002 to about 15% and the industry should see negative growth of 4.5% in 2003, according to Dataquest. Modest growth should occur in 2004 when semiconductor sales should rise 5.6%

Leading the chip charge this year is the memory IC market. The dram industry should grow 58% to $37 billion.

One reason for the growth in semiconductor sales is new applications. Chip consumption is expanding beyond PCs into new communications applications. There is strong demand, especially for logic, analog, discrete and optical semiconductors.

The downside of a booming chip market is shortages. "The industry is running at high capacity with reports of shortages and tight capacity for flash, microprocessors (MPUs) and some dram architectures," says Mark Giudici, principal analyst in Gartner Dataquest's worldwide semiconductor group. "Near-term spot pricing is reacting to inventory building and should not be confused with the overall industry supply/demand picture. Buyers can expect higher prices for dram, flash and some sram," says Giudici.

Flash suppliers are seeing strong bit growth. Prices should remain high through 2001. Flash capacity is expected to remain tight through 2001 until new capacity comes on board in late 2001 and into early 2002.

"Demand for flash architectures has spread across all application segments," says Olsson. "The biggest consumer of flash, cellular handsets, typically uses two megabytes, but densities will increase as next-generation infrastructure is increasingly deployed," Olsson says.

Note: Prices are averages based on a monthly survey of electronics buyers at OEMs and from input from distributors and market researchers.