2004 will be remembered as a good year for the electronics industry.

Overall, the semiconductor industry will end the year with 28.5% revenue growth, with sales increasing to $213.8 billion, says the Semiconductor Industry Association.

End-equipment markets such as computers, cell phones and consumer electronics equipment helped drive component sales in 2004. In addition, wire-line communications equipment registered growth resulting in greater component demand.

The bad news for the industry is that end equipment demand appears to be cooling off. That means semiconductor revenue growth will be flat in 2005. But look for 2006 revenue to rise 6% to $227.2 billion.

The bright side: purchasers can expect a buyer's market for most components in 2005. Suppliers have added capacity and moved to 12-inch wafers which will increase chip supply. However, it will likely be a modest buyer's market because suppliers are showing some self discipline by scaling back production when inventories start to rise.

In addition, some suppliers are transitioning production from low-running parts to components that are in greater demand. To wit, memory-chip makers switched from DRAM to NAND flash production when DRAM tags declined and NAND flash prices were increasing.

jcarbone@reedbusiness.com