Chip industry growth pegged at 7% for 2001

By David Hannon -- Purchasing, 3/22/2001

The semiconductor industry will grow just 7% to $217 billion in 2001 because of weak demand and excess inventory, especially in the first half, according to market researcher IC Insights.

"For the semiconductor industry, the first half of 2001 looks bad," said Bill McClean, president of IC Insights, who spoke at a recent seminar in Boston. McClean says semiconductor tags will be under pressure because of inventory adjustments, overcapacity and slumping unit demand. The combined factors will cause chip tags to decline 1% in 2001.

The DRAM market will be hard hit. It is forecast to have negative growth in 2001, after two years of strong growth. The DRAM market will fall from $29 billion in 2000 to $27 billion. Excess inventory will affect the market through at least mid-2001 and possibly the end of the year, but 2002 and 2003 will see a return to market growth. New capacity coming online in 2001, combined with a PC sales slump, will put more pressure on DRAM prices, causing a 1% decline in average selling prices.

The report predicts that 64-Mb chips will have an ASP of $5.15 and 128-Mb DRAM costing $9.30. Those prices are down from $7 and $14.60, respectively, the year before.