Euro chip sector faces leaner times

Trade body admits that the scale of this year's drop in demand surprised the chip industry, and warns that worse may be coming for European semiconductor manufacturers

The European semiconductor market will see a further drop in sales in 2002, according to predictions from within the chip industry.

The World Semiconductor Trade Statistics (WSTS) -- a body made up of around 90 percent of the world's semiconductor makers -- forecast this week that chip sales in Europe would be worth £19.9bn in 2002. European chip sales this year are expected to total £20.56bn.

Chip sales are a key indicator of the strength of the IT industry, so the WSTS's predictions suggest that the worst of the technology slump may not be over, at least for Europe.

The WSTS expects worldwide semiconductor sales for 2002 to reach £100bn, a slight increase on this year, when sales of £97bn are predicted. If the £97bn forecast holds firm, then chip sales will have fallen 32 percent compared to 2000, when worldwide sales reached £143bn.

According to the WSTS, many in the semiconductor did not predict such a severe drop. "Industry expectations in the spring of this year was for a growth rate of minus 13.5 percent..... implying a scenario where the market hit the bottom in the second quarter of 2001 and then began a recovery," said the WSTS in a statement. "It has become obvious that the decline in the second quarter was more dramatic than expected."

Things are expected to get better in 2003, when the WSTS expects to see the semiconductor market grow by 18.5 percent. Further growth of 15.1 percent is expected in 2004, but this will not bring the industry back to the stellar heights of recent times. "Industry revenues in 2004 will not equal the level of revenue achieved in 2000," warns the WSTS.

The Semiconductor Industry Association is hoping to see a boost in chip sales in the run-up to Christmas. It said earlier this month that it expected to see accelerated demand for PCs, communications products and handheld devices in Q4 2001.

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