Even the most bullish forecasters--Future Horizons and Semico Research--have recently cut their projections for the IC industry in 2003. Another firm, iSuppli Corp., believes a potential war in Iraq could delay the recovery until the second half of 2003.

And, while warning of a slower growth rate for the IC industry, the Semiconductor Industry Association (SIA) in November lowered its chip forecast, saying the worldwide semiconductor market will increase by only 1.8% in 2002 and 19.8% in 2003.

The San Jose-based semiconductor trade group was more bullish for 2004, projecting 21.7% growth for that year. But then, on the other hand, the SIA dropped hints the IC industry would experience another major downturn in 2005.

Basically, the SIA has reduced its projections. In June, the SIA originally projected the worldwide semiconductor industry will grow by 3.1% this year, and revenues will pick up at an even faster pace over the following two years. At the time, the SIA said semiconductor sales in 2002 are expected to reach $143 billion, $177 billion next year (up 23.2%) and $213 billion in 2004 (up 20.9%) (see June 5 story ).

The trade group blamed the lower forecast on what it called a "pause" in the worldwide IC markets. But it also remained upbeat, thanks in part to growth in Asia, especially China. Products such as digital signal processors, memories, and microcontrollers are also projected to lead the way for a recovery.

"The long-awaited recovery is under way," said W. J. Sanders III, chairman of Advanced Micro Devices Inc., in a statement. "We believe the next several years will see steady growth following the industry's steepest-ever decline in 2001."

Sanders noted that worldwide semiconductor sales are now projected to surpass the peak revenues of 2000 in 2004. "It is now clear that 2000 was a bubble that distorted the industry's compound annual growth rate, pushing it above 16%," he said.

"We believe that compound annual growth rates in the range of 8-to-10% will be the norm going forward over the longer term," he said. "This will represent a sea change for our industry. We can no longer count on the proverbial rising tide that lifts all boats," he said.

"Nevertheless, a huge industry with compound annual growth averaging 8-to-10% will continue to offer opportunities for significant growth for companies that consistently deliver desirable products for their target customers," he added.

The figure indicated that the market is slowing. For some time, the IC industry has been growing on a compound annual growth rate of about 17%.

Sanders downplayed the notion the market is slowing, saying the future remains bright for the IC industry. "Eight to 10% growth sounds pretty exciting to me," Sanders said during a conference call here today.

Forecasts all over the map

Meanwhile, in addition to the SIA, others have also cut their IC forecasts for 2003. For example, Dataquest Inc. cut its IC forecast for both 2002 and 2003. Dataquest claims the market is beginning to see signs of recovery, as revenue is projected to reach $153.3 billion in 2002, a 0.5% increase from 2001. In 2003, the IC market is projected to hit $171.8 billion, a 12.1% increase from 2002, according to Dataquest (see today's story ).

Market researcher IC Insights Inc. lowered its forecasts for the worldwide semiconductor market in 2002 from 4% growth to 1% growth; and for 2003, it has trimmed its expectation from 24% growth to just 15% growth (see Oct. 22 story ).

The World Semiconductor Trade Statistics organization (WSTS) stuck to its Spring 2002 prediction for the 2002 chip market of $142 billion, up 2.3% on 2001, but reduced its growth estimate for the 2003 chip market from 21.7% to 16.6%. As a result the 2003 chip market will be $165.9 billion, not the $173 billion previously predicted, the WSTS said (see Oct. 29 story ). .

Recently, iSuppli Market Intelligence Services reiterated its IC forecast, saying the semiconductor industry would grow less than 1% for 2002 and almost 15% for 2003.

In December, however, iSuppli lowered its prediction for the year-on-year growth of the 2003 worldwide semiconductor annual growth to 11.8% according to a report in Taiwan's Digitimes. The following year is now expected to record 22% growth.

Greg Sheppard, an iSuppli executive vice president, is said to have spoken at a press conference in Japan and to have given conflict with Iraq as one reason why strong semiconductor market growth would be delayed until the second half of 2003 (see Dec. 26 story ).

Some bulls in the mix?

Meanwhile, Semico Research Corp. lowered its forecast, saying that the worldwide semiconductor market will grow only by 6% in 2002. But Semico also projected 30% growth for the IC industry in 2003 (see Sept. 4 story ).

By December, however, Semico lowered its forecast--again. An anticipated dip in demand and average selling prices (ASPs) for semiconductors has prompted Semico to lower its worldwide IC growth forecast by 5%, to a healthy 25% for 2003.

The firm lowered its '03 IC growth forecast from 30% to 25% for several reasons, said Jim Feldhan, president of Semico. "There were a few driving factors," Feldhan said. "First, fourth quarter revenues and the associated ASPs were coming in a bit weaker than expected," he said.

"Second, we felt that the end market demand for 2003 was reasonable and could not justify raising end demand to meet the 30% growth," he said. "Third, downward revisions to the ASP added to the decline to the 2003 growth rate."

The market researcher remains bullish. "Still, a growth of 25% in 2003 is achievable with single digit sequential quarterly growths," he added (see Dec. 30 story ).

Future Horizons was also originally upbeat, saying the IC market will grow by 26.6% in 2003 over 2002, with a spread somewhere between 17-35% (see Oct. 1 story ).

Last month, the market researcher suddenly changed its tune. The 2003 semiconductor market will grow 15% to 16% compared with 2002, according to market research consultancy Future Horizons, which has made the prediction in its December semiconductor industry update newsletter.

"The answer to this is when fab capacity comes back into balance, i.e. when the overall average utilization rate passes the 90% level. Right now this looks like the April, May timeframe and will result in an estimated 15% to 16% value growth in the semiconductor market for 2003. As for 2004, growth in the order of 30% plus is certainly not unrealistic; driven by price increases and strong unit demand," according to the December report (see Dec. 23 story ).

Bring in the bulls

Still others are slightly more bullish. After a two-year slump due to the downturn, the semiconductor and chip-equipment markets are expected to show 20% and 9% growth, respectively, in 2003 over 2002, according to a new forecast from VLSI Research Inc.

The chip and fab-tool markets are expected to pick up in the second half of 2003, but there are signs that the recovery will begin in the first part of next year, said analyst Risto Puhakka of VLSI Research, based in San Jose (see Dec. 4 story ).

Don't look for a "spectacular" year in 2003, but the worldwide semiconductor market is projected to grow 18.1% next year over 2002, according to In-Stat/MDR. In total, the worldwide IC market is projected to hit $139.1 billion in 2002, up a mere 0.1% over 2001, according to In-Stat. But the research firm is looking for the IC market to reach $164.2 billion in 2003, up 18.1% over 2002 (see Oct. 16 story ).