The following is a regular monthly column provided to SBN by analysts at Semico Research Corp.
Historically, semiconductor industry revenues have increased at a compound annual growth rate of 17%. Semico's forecast for 2002 is 19-to-20% growth in semiconductor revenues, not too much higher than the historical average.
In the past, the foundry market has outpaced overall industry growth by anywhere from 20% to 40%. The Semico foundry wafer demand forecast is in the range of 33-to-39% growth for 2002 from last year.
Some may say this is overly optimistic. But if the foundries do not grow by at least 25% in 2002, the outcome could be disastrous for some suppliers. The dedicated silicon foundries were running at about 40% capacity utilization in 2001. If we assume that capacity utilization rises to just 50%, and there is no increase in total capacity, the result is a 25% increase in total number of wafers produced.
Semico definitely believes that capacity utilization will rise above 50% in 2002. But let's say the foundries do add capacity in 2002, a highly like scenario. If the foundries add just 6% more capacity and at the same time increase utilization rates to 50%, the percent change in wafer output will increase by 29% to 32% in 2002.
Looking at it from another point of view, to reach 37% growth in wafer output in 2002, foundries only have to increase capacity utilization from 40% in 2001 to 55% in 2002.
Semico believes that anything below 25% growth for foundry demand could be detrimental because foundries cannot sustain growth or breakeven at a 40% capacity utilization level.
The economy will see increased growth in 2002, based on the government fiscal and monetary policies. The Semico foundry wafer demand forecast is based on new products being introduced in 2002 from both fabless and IDM integrated device manufacturer companies. These products have been under development over the last 12 months and are poised for market introduction. They will be the building blocks for higher speed Internet connections and digital TV--two applications that are sure to be in demand in the near future.
(See last month's commentary on foundry trends.)
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