SAN JOSE, Calif. The World Semiconductor Trade Statistics (WSTS) group on Tuesday (May 31) raised its semiconductor forecast, by projecting moderate growth over the next two years verses a relatively flat market. However, one analyst said that he takes all chip forecasts with a large grain of salt.
Meanwhile, in its new forecast, the WSTS projects that the IC market will reach $226.5 billion in 2005, up 6.3 percent over 2004. In 2004, the chip market hit $213.0 billion, up 28 percent over 2003.
In 2006, the WSTS projects the IC market will hit $238.2 billion, up 5.2 percent over 2005. In 2007, the WSTS projects the IC market will reach $263.3 billion, up 10.5 percent. See table below for projected growth rates for ICs, geographic regions and product sectors.
Late last year, the WSTS data collection group cut its forecast for global chip market growth in 2005 to 1.2 percent. Lackluster growth of 1.2 percent replaces a previous prediction of 8.5 percent and is to be followed by 3.0 percent annual growth in 2006 and 11.4 percent annual growth in 2007
Many research firms have also raised their forecasts. Last week, IC Insights Inc. raised its IC growth forecast from minus 2 percent to plus 4 percent for 2005. It did not change its forecast for capital spending, which calls for a 5 percent decline to $43.4 billion in 2005 (see May 26 story).
However, some dismiss the chip forecasts all together, as the predictions seem to change like the weather. David Wu, an analyst with investment banking firm Global Crown Capital (San Francisco), said he takes all chip forecasts with a "large" grain of salt, saying it's difficult to predict the future.
Wu does, however, see some positive signs in the IC market. "Business is more solid than the original projections," he said.
"Q1 was a little better than expected," said Mark Edelstone, an analyst with Morgan Stanley in San Francisco. "Prices are a little more stable."
Edelstone, however, said he has not changed his overall semiconductor forecast, which calls for 0-to-5 percent growth in 2005 over 2004.
In its new prediction, the WSTS group was far more optimistic about 2005. "Within the environment of a generally recovering world economy and growing demand in major application end-markets, semiconductor industry growth in the first quarter of 2005 was stronger than projected, despite of first signs of deceleration observed in the second half of 2004," according to the WSTS.
"While the current forecast maintains the 'soft landing' scenario, the industry anticipates positive growth throughout the forecasting period with mid single-digit growth rates in 2005 and 2006 and thereafter to resume double digit growth," according to the group.
The different regions and products maintain their historical patterns. The "memory product cycle is more pronounced than the other products and Asia Pacific continues to be the fastest growing region, due not only to a continuing shift in equipment production but also to rising internal demand in those countries," according to the group. "The growth of equipment production in Mainland China is expected to sustain faster than average growth in Asia throughout the entire forecasting period."
Click image below for projected growth rates for ICs, geographic regions and product sectors:
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