It's that time of year again, when the industry's pundits peer into the future to tell us whether the next 12 months will bring feast or famine. The highly anticipated season of prognostication carries an extra bit of urgency this year as analysts strive to predict the inflection point that will mark a return to robust growth for the electronics sector.
There's at least one good thing to say about this rotten market: it seems to have injected some humility into the estimates coming from the industry's seers. The Semiconductor Industry Association, for example,
projected in November 2000 that the coming year would witness a 22% surge in chip sales. What resulted was more like a 31% decline. Stung by the huge miscalculation, the group last year offered a more conservative 6.3% growth estimate for 2002. That, too, is proving to be overly generous, but not by nearly as wide a margin.
Research firm Gartner Dataquest generally issues its annual outlook just ahead of the SIA. Two years ago, it was even more bullish on the prospects for 2001, estimating that semiconductor sales would "cool off" to a 27% growth rate. The most recent Dataquest forecast, issued two weeks ago, is markedly more tame and foresees semiconductor sales in 2002 rising a mere 0.5%. Given that 10 months of the year have already elapsed, this isn't necessarily a feat of predictive genius, but the figure is still pretty close to Dataquest's original expectation last November that the coming year would see growth of 2.6%.
What of the year ahead? With the likely exception of the wireline communications market, most believe that 2003 will show an improvement as corporate IT spending is reestablished.
But that's also proving to be a mighty temptation for some analysts to begin inflating growth estimates. Climbing right back into the saddle, the SIA now says the market should recover at a rate of roughly 20% for each of the next two years, setting a new semiconductor sales record in 2004. Dataquest, on the other hand, chopped earlier projections by more than half and is predicting that 2003 will register growth of 12.1%.
Which estimate carries more weight? That will depend on whether the industry resumes its his-torically torrid sales pace or assumes a milder demeanor.
For much of the late 1990s, a vocal industry minority argued that the use of electronics had become so pervasive that the market's characteristic volatility was becoming a thing of the past. That may be true, but it may also be that the new era of stable growth settles in at the level predicted by Dataquest rather than the SIA.
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