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Chip oversupply sparks market correction

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

Keywords:microprocessor? international data? idc? wafer?

An oversupply of microprocessors has sparked a market correction that is expected to lead to a drop in revenues next year, a market-research firm said Thursday. The expected correction, however, would not affect the 26 percent revenue growth International Data Corp. (IDC) projected for this year. Nevertheless, revenues in 2005 would drop 2 percent, from the $210 billion forecast for this year.

The market would return to positive growth in 2006, IDC said, and experience a five-year compound annual growth rate of 11.3 percent, from 2003 to 2008.

"The correction was brought on by production plans that outstripped real demand," IDC analyst Mario Morales said in a statement. "A series of order cancellations and [original equipment manufacturer] push-outs in the middle of the year resulted in an inventory overhang for suppliers."

Chip manufacturers are expected to cut back on capital spending and on new wafer starts, enabling prices to stabilize in the second half of next year, Morales said.

In clearing bloated inventories by the second half of next year, suppliers are expected to get help from the ongoing replacement cycle in corporate PCs and mobile phones, and increasing demand for consumer electronics.


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