Finally, after one of the longest downturns in the industry, we are experiencing the upturn. Fab utilization, which hit a low of 63 percent in the third quarter of 2001, increased to 83 percent in the first quarter of 2003. Additionally, leading-edge capacity (sub-0.16 micron) is at 97 percent and VLSI Research predicts that overall capacity will reach 90 percent this quarter. The Semiconductor Industry Association's (SIA's) recent August 2003 report shows six consecutive months of industry growth, up 12.5 percent over August 2002 semiconductor sales.

These are positive statistics but still far from the 30+ percent annual growth the industry experienced in the mid-90s. For most mature industries, however, 10+ percent sales growth would mark an excellent year. Could it be we've matured as an industry without realizing it?

A look at the areas of leading growth suggests it is so. The SIA credits the current upturn to increasing demand in the consumer electronics, computer and wireless sectors. None of these are new, nor offer the "next killer app" that is needed to fuel dramatic growth.

What we are seeing is increased semiconductor content in existing applications. A cellular phone, for example, was originally just a portable telephone. Today, it includes a computer, a digital camera and a modem, requiring more semiconductor content. The same holds true for many other applications-from automobiles to enterprise and household appliances.

Meanwhile, semiconductor development costs are skyrocketing. At the 0.18-micron node, developing a new device costs just over $15 million. Estimates for the 45-nanometer node suggest it will approach $45 million.

Chip development costs today at the 90-nm node will reach $30 million. Assuming a 20 percent R&D investment, that one chip needs to generate revenue of at least $150 million-on a single product-to succeed.

This means that the companies that will succeed in the future are those that will offer products not dependent on a single application or market, but, instead, will be able to serve many customers or many markets.

Companies that will be able to rise to the occasion will include manufacturers of general-purpose devices, such as memory, analog or mixed-signal ICs, and those of programmable products, such as microprocessors, digital signal processors and programmable logic.

John Daane is president, chief executive officer and chairman of Altera Corp. He will deliver the keynote address Wednesday night at the annual Semiconductor Industry Association dinner in San Jose, Calif.