No IC downturn seen in '05 by some analysts and execs

While many IC forecasters predict a mild IC downturn in 2005, VLSI Research (Santa Clara, Calif.) is sticking to its earlier forecast of positive 8 percent growth for the semiconductor industry in 2005 over 2004. In 2004, the IC industry is projected to grow by 30 percent, according to the research firm.

"I think the market will surprise us next year," said G. Dan Hutcheson, president of VLSI Research.

Mike Splinter, president and chief executive of Applied Materials Inc. (Santa Clara, Calif.), is also bullish. "Looking at 2005, there are some excellent opportunities," Splinter declared during a keynote presentation at the annual Semiconductor Equipment and Materials International (SEMI) awards dinner on Thursday (Oct. 21).

Indeed, even the IC-equipment business is expected to rebound after a series of order delays and pushouts in recent months, Hutcheson said. "The pushouts ended last month," he said. "The order activity has restarted."

At present, however, the signs are somewhat bleak. The worldwide IC-equipment book-to-bill ratio was 0.81 in September, down from 0.94 in August, according to VLSI Research on Tuesday (Oct. 19).

At the same time, front-end capacity utilization fell below 90 percent in September. Front-end utilization dropped 2.5 percentage points from August to September, but the figure was still at 88.5 percent, according to VLSI Research (see Oct. 19 story).

Hutcheson predicts that worldwide fab utilization rates will fall to 85 percent by year's end. Fab utilization rates were at 100 percent in April, but capacity has become less tight amid a lull and the inventory correction issues in the marketplace.

Still, the overall picture is bright. "There is no downturn from a microeconomics point of view," he said.

During the keynote, Applied's Splinter cited the worldwide chip forecast from the Semiconductor Industry Association (SIA), which calls for 4.2 percent growth for ICs in 2005 over 2004.

In an interview with Silicon Strategies, the Applied executive also said that leading-edge chip makers like Intel and TSMC will continue to push the technology, which, in turn, will fuel the semiconductor equipment industry.

In effect, Moore's Law will help drive the industry, he said. "I don't see [the process technology cycle] slowing down," he said.