MANHASSET, N.Y. A rapid rise in energy prices coupled with a growing excess of manufacturing capacity has prompted iSuppli Corp. to trim its semiconductor industry forecast for 2005.
iSuppli (El Segundo, Calif.) now projects global semiconductor sales to reach $232.7 billion in 2005, up 2.4 percent from $227.2 billion in 2004. For 2006, sales are projected to rise 4.3 percent to $242.8 billion.
The firm previously projected a 5.9 percent sales increase in 2005, followed by a 3.9 percent increase in 2006.
iSuppli attributed the lower 2005 growth to rising oil prices, which in turn has affected end demand.
"Although a strong third quarter is expected, this will be followed by a flat fourth quarter, which will result in 4 percent growth the second half of the year," said Gary Grandbois, principal analyst, analog IC/semiconductors for iSuppli, in a statement.
The firm believes that while the impact of Hurricane Katrina remains unclear, the catastrophe is likely to exacerbate the current energy crisis.
iSuppli’s forecast contrasts markedly with other market research forecasts. Advanced Forecasting (Saratoga, Calif.) projected earlier Thursday that the semiconductor market would see double-digit sales growth in 2006, prompted by rising unit sales and an increase in capacity utilization.
In July, Malcolm Penn, chief executive of Future Horizons, steadfastly insisted that 2005 semiconductor sales would rise 15 percent, followed by a even more robust 20 percent for 2006.
iSuppli's caution is also prompted by rising semiconductor manufacturing capacity. The firm noted that global production capacity rose 3.1 percent sequentially in the third quarter.
"With the significant amount of capacity that is available, if end demand does not significantly increase, the fourth quarter will experience a slowdown in manufacturing run rates," said Len Jelinek, director and principal analyst, semiconductor manufacturing for iSuppli, in a statement.
Jelinek added, "The severity and length of this slowdown will be determined by the amount of semiconductor inventory built up in the third quarter."