Semiconductor industry to see worst-ever downturn

A new study deepens fears over the chip industry's health, predicting a 21 percent decline this year
Written by Matthew Broersma, Contributor

The semiconductor industry is facing its worst annual downturn ever, according to new figures from IC Insights, a US market research firm.

A report issued on Monday predicts that the market will shrink by 21 percent in 2001 over 2000. The figures are worse than IC Insights' previous prediction, issued in March, of a 9 percent decline.

As a result of the end of dot-com euphoria and a serious slowdown in the US economy, many companies have stopped ordering new computer equipment and have cancelled existing orders. Even the biggest semiconductor companies have felt the pinch; Intel, for example, is expected to see its second-quarter revenues down as much as 25 percent on the same period last year.

The new research underscores the dramatic nature of the downturn for the chip industry. IC Insights says the worldwide integrated-circuit market will shrink from $177bn (about £125bn) in 2000 to $139.2bn in 2001. If the prediction proves correct, 2001 will be worse even than 1985's record contraction of 20 percent.

In the third quarter the market is expected to recover by 6 percent over the second quarter, followed by a sequential increase of 11 percent, IC Insights said. It believes that, barring a recession, the market will continue to recover to reach $162bn in 2002, a 16 percent increase over this year.

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