The Semiconductor Industry Association (SIA) today slightly raised its chip forecast for the third quarter of 2003, although the trade group has not altered its 10.1% growth prediction for 2003.
After flat growth in the second quarter of 2003, the semiconductor industry is expected to show 5% to 8% growth in the third period of this year, said Doug Andrey, principal industry analyst for the SIA, San Jose. That figure is 0.5% to 1% higher than the original projection, Andrey said.
"We think the third quarter will be better than expected," he said. "We are more optimistic about the third quarter."
The slightly improved forecast reflects falling chip inventories and higher fab utilization rates for leading-edge capacity. Demand for flash memories, logic, and optoelectronics remains robust, but digital signal processors (DSPs), DRAMs, and microprocessors fell into negative territory during the second quarter.
The SIA, meanwhile, is still projecting 10.1% growth for 2003. The trade group is not changing its forecast for the year, due to lack of visibility in the fourth quarter, Andrey said during a conference call.
Still, the projection for the third quarter indicates that the market is improving. Worldwide sales of semiconductors were $12.54 billion in June, up a mere 0.3% from $12.50 billion in May 2003, and up 10.4% from $11.35 billion in June 2002, according to Global Sales Report (GSR) figures released by the SIA. The SIA added that second quarter chip sales of $37.6 billion were up 3.2% from $36.4 billion in the year's first quarter, and up 10.4% from the $34.1 billion recorded in the second quarter of 2002.
The semiconductor industry is slowly returning to health, as excess chip inventories have become "negligible," Andrey said. Chip inventories fell from $300 million in the first quarter of 2003, to $150 million in the second quarter, according to iSuppli Corp.
This compares to a whopping $2.5 billion in terms of excess chip inventories during the second quarter of 2002, according to the El Segundo-based research firm. Back in the first quarter of 2001, the channels had some $8 billion in excess inventories, according to the report.
Another positive indicator is leading-edge fab utilization rates, which are hovering at around 95% for 0.15-micron geometries and below, according to Andrey. Fab utilization rates for 0.18-micron capacity are sitting around 88%, he said.
On the product front, flash memories and optoelectronics remain robust, due to demand for camera phones and related products. In the second quarter, optoelectronic-based devices were up 33.9% and 12.4% year-over-year and quarter-over-quarter, respectively. In the same period, flash was up 37.1% and 6.3% year-over-year and quarter-over-quarter, respectively.
There were other winners during the second quarter. MOS logic was up 8.7% quarter-over-quarter and 14.7% year-over-year.
The losers in the second quarter were DSPs, processors and DRAMs. DSPs were down 10.5% in the second quarter of 2003 over the first period, but were up 14.4% in the like period a year ago. DSPs were impacted by a slowdown in wireless in Asia, due to SARS.
The PC sector was also sluggish in the second quarter, as processors fell 4.8% quarter-over-quarter and DRAMs declined 0.5%. Processors are up 8.2% year-over-year, but DRAMs are down 2.7% for the year.
In other product markets, analog devices in the second quarter were up 7.6% quarter-over-quarter and 9.8% year-over-year. Microcontrollers were up 1.7% quarter-over-quarter and flat for the year.