As we head into the second half of what most now will call a bona fide recovery year, there is a resounding sense of optimism, albeit something less than the exuberance that ushered in the last great upswing. And that is a good thing. Measured caution and rational thinking should carry the day throughout the rest of 2004 and into 2005.

At the mid-year point of 2004, there are encouraging and tangible signs to justify optimism: industry watchers have recently revised upward their semiconductor growth forecasts by a couple of percentage points; capacity utilization is in the 90 percent range industry-wide with some foundries sold out at leading processes; and capital expenditures are increasing, thus enabling more capacity to come on line. Still it's important that we don't forget the mistakes and trends that shaped the past few years, and apply them to our strategies as we move forward.

The good news is that the current recovery appears genuine. The better news is that it is broad-based, not solely dependent on a single killer application, revolutionary process, or "emerging" country or region. Some key growth areas to watch include broad adoption of new integrated data services for wireless voice applications based o standards; next-generation wireline broadband technologies gaining traction, particularly in Asia; and home and personal applications, including sophisticated telematics in automobiles and high-definition TV.

Geographically, most regions are showing upbeat economic signs, including — and significantly — long-struggling Japan, which finally appears to be poised for a sustained uptick.

Of particular interest is the continued expansion of programmable technology into new areas. Market research firm iSuppli is calling for the PLD market to top $3 billion in sales, and the FPGA component of the industry to grow faster than the overall semiconductor market. Today's FPGAs are more than ever a preferred alternative to fixed architectures, delivering new levels in price, performance and flexibility. We expect to see further penetration into the traditional ASIC and ASSP markets by programmable technology this year and into the future.

Moore's Law continues to present us with new design and manufacturing challenges, which our industry gamely takes on — and ultimately solves. And perhaps that should be our greatest source of optimism: the spirit of innovation that has been a hallmark of the semiconductor industry since its inception burns as strongly as ever throughout every corner of the world.

Wim Roelandts is President and CEO, Xilinx, Inc. and Chairman, Fabless Semiconductor Association.