The ongoing recovery in the chip industry is real and should continue, barring more terrorist attacks or a collapse in Japan's economy, analysts from market research firm Dataquest Inc said yesterday in Taipei.
"A real and sustainable recovery will commence from late 2002 onwards," said Tan Kay Yang, a Singapore-based analyst for Dataquest.
Despite short-term weakness in memory chip prices, the overall industry is strengthening on sales of personal computers and consumer electronics products.
Dataquest expects the chip industry to grow 4 percent this year to US$160.1 billion. Last year sales plummeted by 32 percent to US$155 billion.
Chipmakers in Taiwan are expected to rise fast with the upturn, especially foundries Taiwan Semiconductor Manufacturing (
TSMC and UMC, which produce chips on behalf of customers such as Intel Corp and VIA Technologies Inc (
Going forward, the firm predicts the foundry business will grow 22.7 percent per year between 2001 and 2006, as chipmakers such as Motorola, Texas Instruments and others step up outsourcing to focus on research and development.
By 2005, foundry chipmakers should account for roughly 50 percent of worldwide semiconductor sales, up from just 12 percent last year, according to Tan.
TSMC and UMC dominate the foundry sector, commanding 82 percent of the market last year.
Dataquest also said the recovery in the electronics sector should bode well for DRAM. Taiwanese DRAM powerhouse Nanya Technology should benefit from the demise of South Korea's Hynix Semiconductor, which has only remained in business with the help of multi-billion dollar emergency loans.
"From what my contacts in the industry say, Nanya is gaining market share in a number of strategic [customer] accounts," said Richard Gordon, Dataquest's principle memory chip analyst.
He said "uncertainties" at Hynix should help Nanya woo new customers.
"It is clear [Nanya] will be around in five years," Gordon said, while Hynix is teetering on the edge of bankruptcy after the company's board balked at a merger with Micron Technology of the US.
Gordon also said Hynix was at least partly responsible for recent weakness in DRAM prices. In the first quarter, DRAM prices rose as a Micron-Hynix tie-up appeared likely. But when the company's board voted against the deal, prices fell again.
The analyst believes Hynix could be producing chips at low rates in order to improve cash flow. If so, a price war could break out soon, he said.
Looking forward, analysts at Dataquest say China is the biggest growth story for the Asia-Pacific region outside of Japan.
China's chip market was worth US$13 billion last year, according to Dataquest.
By 2006, China's chip market should be worth US$30 billion, with annual growth of 16.9 percent over the next five years.
Taiwan's chip market, by comparison, is projected to grow 10.3 percent per year between 2001 and 2006, and was valued at around US$9 billion last year.
Despite the disparity in market size, the value of chip production in Taiwan hit US$8.85 billion last year, while China produced just US$640 million in chips.
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