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Analyst: No semi industry downturn for now

Posted: 20 Mar 2006 ?? ?Print Version ?Bookmark and Share

Keywords:Advanced Forecasting? fab? IC?

A cautious attitude toward fab expansion by chip makers is likely to prevent overexpansion and a near-term recession, according to an analyst from Advanced Forecasting.

Rosa Luis, director of marketing and sales for Advanced Forecasting, noted that fab capacity utilization of state-of-the-art technology (line widths smaller than 0.12) reached a record 99 percent the Q4 of 2005. Typically, such robust cycles were followed by recessions, such as in 1995 and 2000, but she doesn't see that happening this time.

She noted that the industry is in a stronger position in which over-heating is not present, as IC sales have not yet exceeded the predicted underlying demand. Luis added that decisions to increase manufacturing capacity are now made more carefully in order to alleviate a repeat of the over-capacity circumstances of 2001.

The increases in production of wafers (6 percent) and in sales of IC units (10.6 percent) in 2005 over 2004 contrasted sharply to the 11 percent decline in total sales of new semiconductor equipment, the firm noted. Billings of worldwide wafer processing equipment have stagnated for the last half year at $1.71 billion per month after declining from a peak at the end of 2004.

Still, Luis warned, "The current cautious behavior does not preclude the possibility of over-heating from occurring. We do believe both IC units and revenues in 2006 will have growth in the double-digits over 2005 and this could very well lead revenues to exceed underlying demand and cause overheating, resulting in overcapacity and inventory buildup, precursors to a recession."

Luis added, "We believe it is preferable for the chip industry to grow at a rate similar to the current rate of 12.3 percent for IC units and 5.9 percent for IC revenues year-over-year than to grow at a 30 percent just to be followed by another deep recession," stated Luis. "We also believe that a return to growth rates around 30 percent year-over-year is unlikely to occur in this maturing market."

EE Times

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