2000: The year of the chip

1999 was first time in four years that the semiconductor market has experienced double-digit growth, says Dataquest

The chip market is heading for boom times according to research from Dataquest, published Thursday -- but while US growth has the Internet to thank, in Europe the growth is driven largely by telecommunications.

Semiconductor revenue for 1999 surpassed £98bn, an increase of 17.6 percent over 1998 revenue and the first time since 1995 that the market has experienced double-digit growth according to preliminary figures from Dataquest. Analysts believe it is the start of a three year boom cycle for the notoriously volatile chip market.

Chief chip analyst at Dataquest, Joe D'Elia says the European market has been helped by the proliferation of telecoms technology, including mobile phones. "The Internet is the single biggest factor but it has primarily had an impact in the US. In Europe it is telecommunications that drives the market and in Japan it is consumer electronics," he said.

Other factors include the price hikes experienced in the to the DRAM memory market in the latter part of the year. The September quake in Taiwan played a part, causing panic on the "spot market" -- where spare or non-allocated DRAM is sold -- and trebling prices within a week. "This panic crept over to the contract market [where the majority of DRAM is sold]," according to D'Elia.

Intel continues to dominate -- with 1999 revenue at £16bn it is making more than £10bn more than its nearest rival NEC. Samsung, ranked sixth in the top ten of chip vendors, had the strongest growth, up nearly 50 percent on 1998 revenue. D'Elia predicts 2000 will be the year of the merger, with many companies focusing on one area of the market or getting out of manufacturing altogether. "There will be a lot of consolidation," he said. "Not every company can supply across a broad range of applications any more. A next generation fab costs £2bn and not a lot of companies can afford that."

D'Elia predicts Intel rival AMD will sell off its networking and communications division in order to focus on manufacturing processors and flash memory.

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