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Intel's Barrett takes SIA's IC forecast 'with a grain of salt'

Posted: 08 Nov 2004 ?? ?Print Version ?Bookmark and Share

Chip executives were mixed over the latest forecast presented by the Semiconductor Industry Association (SIA).

At a press event on Wednesday (Nov. 3), for example, Intel Chief Executive Craig Barrett startled the audience by saying that he takes the SIA's IC forecast with a "grain of salt" despite receiving an award from the trade group.

Other executives upheld the SIA forecast, saying that the IC market is headed towards flat growth in 2005 after two years of a sustained upturn. Still another executive blasted the media and analyst community for hyping the current slowdown and inventory correction issues in the marketplace.

On Wednesday, the SIA released its revised forecast for 2004 to 2007, predicting sales to rise 28.5 percent to a record $213.8 billion in 2004, but the market will remain essentially flat in 2005, as the excess inventory problems many chip companies are now reporting make their impact felt.

The forecast projects sales will grow by 6.3 percent to $227.2 billion in 2006 and by 14.2 percent to $259.4 billion in 2007. According to the SIA, projections of a less favorable supply-and-demand balance for memory products will be the major factor in dampening industry expansion next year.

Responding to the figures in general, Intel's Barrett indicated that IC forecasting remains an inexact science at best. "We don't make forecasts," Barrett said. "Unlike the two guys beside me, I take the SIA forecast with a grain of salt."

Barrett was referring to two chip executives who were at the press event: Steve Appleton, chairman, president and CEO, of Micron Technologies Inc., and Wilfred Corrigan, chairman and CEO of LSI Logic Corp. At the event, Appleton was named chairman of the SIA, succeeding Corrigan. Brian Halla, chairman, president and CEO of National Semiconductor Corp., was elected as vice chairman.

Barrett himself received the 2004 Robert N. Noyce Award at the annual SIA forecast and awards dinner on Wednesday. The Robert N. Noyce Award recognizes outstanding achievement and leadership in support of the US semiconductor industry.

Meanwhile, this is not to say Barrett is bearish about the industry despite the current inventory correction issues in the marketplace. "I don't think the inventory correction is a euphemism for a slowdown," he said during a question and answer period during the press event.

Intel itself had a disappointing quarter in the third period, but the company had a better outlook for Q4, Barrett said. The Intel CEO, who is retiring next year, is bullish about technologies like WiFi, WiMAX, among others.

Kill the messenger

Another executive took a shot at the media and analyst community, saying that they are attempting to exaggerate the current dynamics in the IC market.

The media wants to equate the current slowdown with the horrific downturn in 2001, according to Corrigan. The media looks at the current market and says, "My God, it looks like 2001," Corrigan said at the press event. "It's a rush to judgment by the media."

The LSI Logic executive also did not spare the analyst community in general, saying that they have the herd mentality when it comes to forecasting. "Early this year, those guys were chasing each other [in terms of making bullish forecasts when the market was hot]," he said. "Now, they are competing with each other to come out with the lowest numbers."

Corrigan indicated that the IC inventory issues are somewhat exaggerated, although he did acknowledge that the chip market is in the midst of a lull. "It's a slowdown," he said. "I don't think it's a crisis."

He predicted that the current IC inventory in the market will "more or less get worked off by the end of the year." He was also upbeat in terms of the overall outlook, saying IT spending is projected to climb.

In total, chip inventories were $1.1 billion at the end of the third quarter, said Doug Andrey, principal industry analyst for SIA. This compares to $15 billion in the same period in 2000, when the past downturn occurred, he said.

Like Corrigan, Andrey predicted that chip inventories would subside by the first quarter of 2005. By then, however, the IC industry is projected to slow and flatten after "two very good years in the cycle," he said.

However, the SIA forecast differs from predications at IC Insights, Semico Research and others, which project negative growth in 2005 due to a capacity glut, lackluster end-user markets and other factors.

Why is the SIA less pessimistic? "We believe people will manage their inventories better [in 2005]," Andrey said.

- Mark LaPedus

Silicon Strategies

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