Research firm sees 20% growth for ICs in 2005

GEORGETOWN, Mass. — A research firm believes that its original prediction of 40 percent growth for the semiconductor industry in 2004 is somewhat "aggressive" but the organization is sticking to its bullish 20 percent forecast for 2005.

Bucking the trend in the industry, consulting firm IC Knowledge in July projected that the semiconductor business would see 40 percent growth in 2004 and 20 percent in 2005. IC Knowledge and venture capital firm Great Bay Ventures also collectively formed The Portsmouth Group, which provides IC industry revenue models and technical analysis to fund managers (see July 16 story).

"The way the stock market had been treating semiconductor companies lately you might think the semiconductor sky is falling, and yet by all objective measures the industry is doing very well," said Scott Jones, president of IC Knowledge (Georgetown, Mass.) and principal of The Portsmouth Group, in a recent report.

"We have been forecasting greater than 40 percent growth for 2004 over 2003," Jones said. "We still expect the second half to be strong, although record high oil prices do have us concerned that our forecast is now looking aggressive overall. We also still expect 2005 to show reasonable growth with our preliminary forecast for 20 percent growth."

The signs are positive in the market. "The SIA recently announced that Q2� showed revenue growth of 40 percent over Q2�, surprising many observers with the strength of the growth," he said. "Underlying product demand is good with wireless networking, mobile phones, consumer products and automotive all strong, and we expect PC demand to strengthen in the second half driven by new chip sets and features."

The Portsmouth Group forecast for 2004 was for utilization rates in the low-90-percentile for Q1, mid-to-high 90 percent for Q2 and high-90 percent for Q3 and Q4. "We still expect Q3 and Q4 to show high nineties utilization and rising ASPs due to supply constraints," he added.