Don't delay buying SDRAMs. Many DRAM manufacturers have high inventory levels of SDRAM, but that won't last. Micron has written off about $174 million of SDRAM and most DRAM makers are switching production to double data rate DRAMs. SDRAM tags fell dramatically over the summer. Example: the spot market price for a 256 Mb SDRAM fell from $7.37 in September to $4.90 in October.

Expect more integrated passive devices (IPD) to pop up on bills of materials. IPDs, which combine capacitors, resistors, inductors and sometimes diodes into a single package, will be in great demand over the next several years. The market will grow from about $456 million in 2002 to $1 billion in 2004, according to market researcher iSuppli.

The memory IC supplier ranks are getting smaller. Hitachi and Mitsubishi will merge their systems chip, SRAM and flash operations next April forming a new company. As part of the deal Mitsubishi will sell its DRAM operation to Elpida, which will become Japan's last DRAM company.

Look for prices for standard logic to fall for the next several quarters. Demand has been soft because of continued weakness in the telecommunications and computer industries. The lack of demand has affected spot prices. Example: The price of a 74HC244 logic chip fell from about 20 ¢ to 19 ¢ from late August to late September. Further price declines are likely as logic suppliers don't expect any big surges in demand.

Expect the semiconductor industry to recover next year. Semiconductor revenue will grow only 3% to $143 billion in 2002. However, chip sales will rise 30% to $186 billion, in 2003 according to Semico Research. Computers and cell phones will drive chip sales and demand from telecommunications companies will pick up in late 2003.

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