News Release from: Future Horizons
Edited by the Electronicstalk Editorial Team on 13 April 2004
Semiconductor industry must not overshoot recovery
The semiconductor industry may ruin its current return to growth by overshooting the sector recovery, a leading semiconductor analyst warns.
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The semiconductor industry may ruin its current return to growth by overshooting the sector recovery, a leading semiconductor analyst warns. Any overshooting of the recovery in 2005 would trigger another downturn in semiconductors, according to the Future Horizons Semiconductor Monthly Update Report. The total worldwide market for integrated circuits - the bellweather of the semiconductor industry - was up 25.6% over the 12-month period to January 2004.
Unit demand over the same period was up 31.4%.
Future Horizons predicts that the demand for semiconductors will outstrip supply well into 2005, driven by automotive, consumer and mobile phone markets.
It believes that this analysis flies in the face of perceived wisdom, which says that the industry will inevitably suffer a downturn at the end of 2004 as it reaches the end of an 18 month growth cycle.
"Confidence is back in semiconductors and the upswing should outlive previous positive periods", said Malcolm Penn, CEO of Future Horizons.
"But if the industry over invests in production and creates flabby inventory levels as it has traditionally done, another downturn will begin to bite late in 2005 or early 2006".
"It is impossible to fine tune fab capacity with market demand, so if these factors occur the industry will inevitably overshoot its recovery and so trigger a downturn", said Penn.
Over investment in new fab capacity is the semiconductor industry's Achilles heel, according to Future Horizons.
This capacity takes months to bring on stream, whereas demand for integrated circuits can change overnight.
Future Horizons cautions the electronics industry to watch for signs of over ordering as OEMs, distributors and CEMs build up inventory, coupled with planned fab capacity and the speed at which it will come online.
The Future Horizons Semiconductor Monthly Update Report is published monthly and available from Future Horizons priced at GBP 1000 for a single-user licence or GBP 2200 for a multi-user intranet version.
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