SANTA CLARA, Calif.--The semiconductor industry is apparently moving into the second year of a recovery in 2004, but leading analysts are now asking the big question: When's the next IC downturn?
The great debate over the next semiconductor downturn surfaced this week, when two leading chip analysts from the Semiconductor Industry Association (SIA) and VLSI Research Inc. disagreed over the timing of the dreaded down cycle.
At the event, Doug Andrey, principal industry analyst for the SIA, reiterated the trade group's previous forecast, which calls for strong IC growth in 2004, followed by a slowdown over the next two years. The chip growth will remain in positive figures for 2005 and 2006. "There are no big problems on the horizon," he said during a presentation at VLSI Research's headquarters this week.
The association is expecting global sales of semiconductors in 2003 to increase by 15.8 percent to $163 billion and it projects 2004 revenues to increase by 19.4 percent to $194.6 billion. It also projects 5.8 percent growth to $206.0 billion in 2005, and 6.6 percent to $219.6 billion in 2006 (see November 5 story).
Other chip analysts also see growth in 2004, but disagreed over the following year. "We have some disagreement over that," said G. Dan Hutcheson, president of VLSI Research. "We see the downturn in the latter part of 2005." At the same time, VLSI Research raised its chip and semiconductor-equipment forecasts for 2004--by a wide margin (see December 16 story).
At one time or another, many believe that the IC industry faces another boom-to-bust cycle, due to overcapacity and lackluster demand. Speaking at a recent conference, Morris Chang, chairman of silicon foundry giant Taiwan Semiconductor Manufacturing Co. Ltd., ignited some sparks, by saying that another semiconductor downturn is expected to take place in 2005, due in part to the new and emerging player in the IC industry: China.
China is building fab capacity at an alarming rate, causing Chang and others to believe that the IC market faces another cyclical round of overcapacity by the 2005 time frame. By then, China's chip makers, which are smaller players right now, will have an impact in the overall IC supply/demand situation.
"Will there be another recession in 2005? Yes. China will cause it," he declared in September (see September 15 story).
There appears to be more agreement--and disagreement--on the subject. After the downturn in 2001 and 2002--with probable modest growth for 2003--the IC industry is expected to enjoy a swift upturn in 2004, followed by another downturn in 2005, according to IC Insights Inc.
Jim Feldhan, president of Semico Research Corp., predicted that the IC market would experience a mild, short-lived downturn in 2005, due, in part, to a glut of 200- and 300-mm fab capacity in the marketplace. In October, the market research firm predicted 13.5 percent growth in 2003, followed by a 26.7 percent upturn in 2004, and a 5 percent decline in 2005 (see October 1 story).
Still others were more optimistic. Mark Edelstone, managing director of global research at Morgan Stanley in San Francisco, sees a "cycle peak in '05 and a cycle bottom 18 months later." In total, the worldwide semiconductor market is expected to grow from 2 percent in 2002, to 10-to-15 percent in 2003, to 15-to-20 percent in 2004, he said in October (see October 2 story).