Chip firm predicts dramatic recovery for 2002

Semico Research is predicting growth of 21 percent next year, as the semiconductor market shows signs of bottoming out
Written by Matthew Broersma, Contributor

A US semiconductor research group is predicting the world chip market will grow 21 percent in 2002, more than triple the estimates of most analysts. The study follows a dismal year for semiconductor sales, dogged by a slowing economy and the bursting of the dot-com bubble.

In its November newsletter, Semico Research says that the semiconductor market has gradually improved over the last few months, and will bottom out in the fourth quarter of this year. The improving prices on integrated circuits, along with other factors, will lead to a 21 percent growth in 2002 sales, Semico says. It has revised the figure down from a 25 percent growth prediction earlier this year, but its projections are still far higher than the modest recovery expected by other analysts.

Semico's projections are partly based on figures from the Semiconductor Industry Association (SIA), which found that sales of integrated circuits declined less in September than in previous months. SIA said the industry was likely to grow 6 percent in 2002 to $150bn (£105bn), with 21 percent growth following in 2003 and 2004.

Gartner Group recently projected a 3 percent rise in 2002, and other firms predict a flat or slightly declining market for next year.

Semico said that average selling prices for integrated circuits increased from a low of $1.50 in July to $1.60 in September.

The firm said the rise of application service providers and a general economic recovery would drive increased revenues next year. In the meantime, delays in new chip fabrication plants and the elimination of this year's inventory buildup will mean higher chip prices.

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