Benefiting from a warming trend in the worldwide economy and strong second-half performance last year, the semiconductor industry is now in the midst of a powerful upturn that should drive about 25 percent growth in 2004. The underlying cyclical nature of our industry remains unchanged, and, accordingly, I believe we will see a deceleration in the industry's growth rate in 2005 and a decline in 2006 before starting back up again on the next cycle.

Twenty-five percent growth in a $200 billion industry is a remarkable feat. What are the forces driving that heady growth? First and foremost it's "mobility plus utility." Mobile devices have become increasingly powerful, useful, fashionable and fun, which is why consumers around the world are buying them in record numbers.

Let's start with PCs, which remain the largest market application for semiconductors. We are witnessing an echo of Y2K, in that a generation of machines bought in 1999 and 2000 have reached the end of their useful life and are now being replaced. And often, light, thin, fast and powerful laptops are replacing those old desktop PCs. Laptops use more expensive components than desktops, and that shift is helping drive semiconductor dollar growth at a faster rate than PC unit growth.

This confluence of mobility and utility drove the mobile-phone market to a record 520 million units sold in 2003 and to a forecasted 570 million in 2004. The transition from voice-centric 2G phones to data-centric 2.5- and 3G phones is strongly resonating with consumers. Color screens, cameras, music, games and video are increasingly features of the most in-demand mobile phones. As an example, 80 million camera phones shipped last year, and that number should more than double this year. Agilent and other camera manufacturers are rapidly ramping capacity to satisfy the market's demand.

Finally, mobility and utility are driving greater demand for semiconductors in the automotive market. Heads-up displays, GPS navigation, drowsy-driver sensors and blind-spot cameras are just some of the new applications intended to make for a safer and more enjoyable driving experience. But consumers also demand that many of the comforts of the living room be available to passengers, so we are witnessing an increased penetration of LCD TVs, DVD players and on-board "infotainment" systems in cars. These applications should double today's semiconductor content in automobiles by 2008.

A second great force propelling the semiconductor market is the tremendous growth in optoelectronics. In 2003, according to World Semiconductor Trade Statistics, optoelectronics grew 41 percent vs. the market's 18 percent performance, and that above-par growth should continue this year. High-brightness LEDs in particular are increasingly a part of an expanding universe of applications from mobile phones and LCD TVs to electronic signs and signals. And as LED capabilities improve, that range of applications will continue to grow.

Young Sohn, President Semiconductor Products Group, Agilent Technologies Inc., Palo Alto, Calif.