SAN JOSE, Calif. The semiconductor industry is in the midst of a recovery, with 11 percent growth expected this year and 17 percent for 2004, according to the top executive of Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC).
Speaking at a conference here on Monday (Sept. 15), Morris Chang, chairman of silicon foundry giant TSMC, also warned that another semiconductor downturn is possible in 2005, due in part to the emerging player in the IC industry: China.
China is currently building fab capacity at an alarming rate, causing Chang and others to believe that the IC market faces another cyclical round of semiconductor overcapacity by the 2005 time frame. By then, China's chip makers, which are smaller players right now, will influence the overall IC supply and demand situation.
"Will there be another recession in 2005? Yes. China will cause it," he declared during a keynote address at the Taiwan+China Semiconductor Outlook conference here.
Ironically for Taiwan and the rest of the IC industry, the dynamics of the semiconductor fab capacity equation have come full circle. Chang said China is now in a position to build up fab capacity for the rest of this decade, similar to Japanese chip makers in the 1980s and what Taiwanese and Korean companies accomplished in the 1990s.
Chang added that China's foundry providers and IC makers are no longer a threat at just the "trailing-edge" of the chip business. He said China could potentially cause a capacity glut in both trailing- and leading-edge technologies.
After the presentation, Chang told reporters that he remains bullish about the IC industry in both the short and long term. "The recovery has been happening," he said. "This year, the semiconductor industry will grow 11 percent. That's not bad at all."
He projected 17 percent growth for ICs in 2004, with a mild downturn in 2005. "I expect near the end of 2005 or early 2006 that we will see a slowdown," he said, adding that the downturn of 2005 will look much like the mild overcapacity situation in 2000.
Chang also remains bullish about the overall IC industry. "I am expecting two or three years of solid growth," he said.