SBN is taking a look back at some of the past news events in a weekly series called "Memory Refresh".
This article first appeared on SBN's website on Nov. 6, 2002. In the article, the Semiconductor Industry Association (SIA) announced its new forecast for the semiconductor market in 2003 and beyond.
The article also compared--and contrasted--chip forecasts from several major research houses. By March of 2003, nearly every market research house lowered its IC growth forecast for 2003.
Look out for more forecast changes ahead. Here's an updated version of the article:
SAN JOSE--Chip forecasts are all over the map for 2003, ranging from bullish, to cautiously optimistic, to somewhat bearish. But heading into the year, most industry experts are already cutting their IC projections for 2003.
Even the most bullish forecasters have recently cut their projections for the IC industry in 2003. Two firms--iSuppli and Semico Research--believe a potential war in Iraq could delay the chip recovery.
And, while warning of a slower growth rate for the IC industry in general, the Semiconductor Industry Association (SIA) in November lowered its chip forecast, saying the worldwide semiconductor market will increase by only 1.8% in 2002 and 19.8% in 2003.
The San Jose-based semiconductor trade group was more bullish for 2004, projecting 21.7% growth for that year. But the SIA dropped hints the IC industry would experience another major downturn in 2005.
Basically, the SIA has reduced its projections. In June, the SIA originally projected the worldwide semiconductor industry will grow by 3.1% this year, and revenues will pick up at an even faster pace over the following two years. At the time, the SIA said semiconductor sales in 2002 are expected to reach $143 billion, $177 billion next year (up 23.2%) and $213 billion in 2004 (up 20.9%) (see June 5 story ).
The trade group blamed the lower forecast on what it called a "pause" in the worldwide IC markets. But it also remained upbeat, thanks in part to growth in Asia, especially China. Products such as digital signal processors, memories, and microcontrollers are also projected to lead the way for a recovery.
"The long-awaited recovery is under way," said W. J. Sanders III, chairman of Advanced Micro Devices Inc., in a statement. "We believe the next several years will see steady growth following the industry's steepest-ever decline in 2001," he said.
"We believe that compound annual growth rates in the range of 8-to-10% will be the norm going forward over the longer term," he said. "This will represent a sea change for our industry. We can no longer count on the proverbial rising tide that lifts all boats," he said.
The figure indicated that the market is slowing. For some time, the IC industry has been growing on a compound annual growth rate of about 17%.
Sanders downplayed the notion the market is slowing, saying the future remains bright for the IC industry. "Eight to 10% growth sounds pretty exciting to me," Sanders said during a conference call here today.
Forecasts all over the map
Others have also cut their IC forecasts for 2003. For example, Dataquest Inc. cut its IC forecast for both 2002 and 2003. Dataquest claims the market is beginning to see signs of recovery, as revenue is projected to reach $153.3 billion in 2002, a 0.5% increase from 2001. In 2003, the IC market is projected to hit $171.8 billion, a 12.1% increase from 2002, according to Dataquest (see today's story ).
By February of 2003, Dataquest downgraded its estimate for 2003 semiconductor market growth to 8.9%, which would see the worldwide chip market hitting $167 billion in value in 2003, up from $153.4 billion in 2002, according to the latest quarterly forecast estimates from the market research firm (see Feb. 24 story ).
Meanwhile, market researcher IC Insights Inc. lowered its forecasts for the worldwide semiconductor market in 2002 from 4% growth to 1% growth; and for 2003, it has trimmed its expectation from 24% growth to just 15% growth (see Oct. 22 story ).
Recently, iSuppli Market Intelligence Services reiterated its IC forecast, saying the semiconductor industry would grow less than 1% for 2002 and almost 15% for 2003.
In December, however, iSuppli lowered its prediction for the year-on-year growth of the 2003 worldwide semiconductor annual growth to 11.8% according to a report in Taiwan's Digitimes. The following year is now expected to record 22% growth.
Greg Sheppard, an iSuppli executive vice president, is said to have spoken at a press conference in Japan and to have given conflict with Iraq as one reason why strong semiconductor market growth would be delayed until the second half of 2003 (see Dec. 26 story ).
More fears about Iraq
Meanwhile, Semico Research Corp. lowered its forecast, saying that the worldwide semiconductor market will grow only by 6% in 2002. But Semico also projected 30% growth for the IC industry in 2003 (see Sept. 4 story ). By December, Semico lowered its forecast to a healthy 25% growth rate for 2003(see Dec. 30 story ).
Then, Semico in February lowered its 2003 chip forecast for the second time in recent months. Now, the Phoenix-based market research house has reduced the forecast to 23%, due to lingering uncertainties in the market.
"The state of the economy can best be described as 'Iraqnophobia,' not to be confused with arachnophobia, the fear of spiders," said Jim Feldhan, president of Semico. "'Iraqnophobia' is the fear/uncertainty of a war with Iraq. This fear includes uncertainty about oil supply, length of war, use of chemical weapons and increased terrorist attacks," he said (see Feb. 25 story ).
Another research firm, Future Horizons, was also originally upbeat, saying the IC market will grow by 26.6% in 2003 over 2002, with a spread somewhere between 17-35% (see Oct. 1 story ).
In December, the market researcher suddenly changed its tune. The 2003 semiconductor market will grow 15% to 16% compared with 2002, according to market research consultancy Future Horizons (see Dec. 23 story ).
And in January, Future Horizons confirmed its position as a bullish forecaster by raising its estimate for 2003 semiconductor market growth to 18% from the 15% or 16% it stated in its December newsletter (see January 28 story ).
Bring in the bulls
Meanwhile, after a two-year slump due to the downturn, the semiconductor and chip-equipment markets are expected to show 20% and 9% growth, respectively, in 2003 over 2002, according to a new forecast from VLSI Research Inc. in December (see Dec. 4 story ).
In February, the firm lowered its forecast. Now, the semiconductor and fab-tool industries are projected to grow a modest 11% and 6% in 2003, respectively, said Dan Hutcheson, president of VLSI Research. "We think 2003 will be another rough year," he said at a conference (see Feb. 27 story ).
Don't look for a "spectacular" year in 2003, but the worldwide semiconductor market is projected to grow 18.1% next year over 2002, according to In-Stat/MDR. In total, the worldwide IC market is projected to hit $139.1 billion in 2002, up a mere 0.1% over 2001, according to In-Stat. But the research firm is looking for the IC market to reach $164.2 billion in 2003, up 18.1% over 2002 (see Oct. 16 story ).