Gartner: Chip revenue to see steady growth

At the same time, an increase in inventory is making chip vendors and distributors worried.
Written by Dinesh C. Sharma, Contributor
Worldwide semiconductor revenue is expected to rise by over 27 percent during 2004, according to a new report.

Revenue this year will reach US$226 billion, market research company Gartner said Tuesday. This is higher than the US$217 billion Gartner predicted at the beginning of the year.

At the same time, an increase in inventory seen at the end of the second quarter is getting chip vendors and distributors worried, Gartner said.

Still, the research company's "Semiconductor Inventory Index" shows that supply chain inventories are at the low end of the "caution" area. Such levels in a growing market are fine, Gartner said.

"The hangover from the severe market downturn (of) 2001 still lingers, just as concerns about the next downturn have begun to worry semiconductor industry executives," Richard Gordon, a research vice president for Gartner, said in a statement. "The classic signs of an approaching peak in the market--such as increased channel inventory, increased capital spending forecasts, (reduced) device pricing and lead times--which, in the past would have been treated lightly at this stage in the cycle, are causing executives to be nervous."

It's expected that the chip industry will go through phases of growth and downturn. But market research companies don't think the current phase of growth will be followed by a downturn as harsh as the one seen in 2001. iSuppli has predicted growth of 11.8 percent in 2005. iSuppli also forecasts that growth during the last year of the current cycle, 2006, will be flat.

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