European chip sales to fall 33 percent

Gartner Dataquest says the European market has been hit hard, but has escaped the worst ravages of a tough year
Written by Matthew Broersma, Contributor

The European semiconductor market has suffered less than the global average this year, but will still have dropped 33 percent by the end of 2001, according to new figures from market researcher Gartner Dataquest.

Speaking at a chip seminar in London, Gartner analyst Andrew Norwood said that European semiconductor revenues for 2001 were projected to be down 33 percent on the previous year, compared with a 35 percent drop in global chip revenues. The drop is the largest in the industry's history, Norwood said.

Despite the depressed figures, however, Norwood noted that the industry is marked by cyclical growth, and said next year will see the beginning of an upswing that will be in full force in 2003. Gartner expects European semiconductor revenues to rise slightly to $30bn (£21bn) in 2002, up from a projected $29bn this year, and to hit 31 percent growth in 2003.

For the next two years growth will be fuelled by the increasing importance of chip intellectual property (IP) companies, the entry of China into the World Trade Organisation and emerging technologies like wireless and digital video, Gartner projects.

IP companies sell designs which can be customised by chip manufacturers for a variety of tasks. Manufacturers are increasingly relying on such designs as a way to boost the power and efficiency of their processors without additional spending on research. IP revenue grew at 40 percent in 2000, and Gartner expects this trend to be unaffected by the global economic slowdown, with revenues increasing at a compound annual rate of 38 percent for the next four years.

UK semiconductor IP companies include ARM and Cambridge Silicon Radio.

No single new technology is on the horizon to fuel chip demand, but Gartner sees a combination of several new markets sparking growth, including the rollout of GPRS and 3G mobile networks, which will demand new handsets. Europe is a particularly fertile market for car navigation equipment, digital set-top boxes and smart cards, Gartner says.

China's entry into the World Trade Organisation next year will also create a massive potential market for technology companies, Gartner projects.

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