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Gartner sees tepid growth in chip industry until 2007

After coming out of an overcapacity-driven trough, the global semiconductor industry is expected to have only a lukewarm recovery through 2007, bucking the historical trend, market researcher Gartner Inc said yesterday.

"This is very peculiar and rare," Gartner analyst Andrew Norwood said at a forum in Taipei.

From last year through 2007, the semiconductor industry is expected to grow at an annual rate of between 5.1 percent and 5.9 percent to US$261 billion in revenues, after recovering from the latest recession, according to Gartner's research team.

Excessive production has caused chip inventories to surge, beginning in the second quarter of last year.

That has driven contract chipmakers led by Taiwan Semiconductor Manufacturing Co (台積電) to around 70 percent factory usage in the first quarter of this year, the lowest level in the past two years.

The recovery this year is far flatter than last year's strong 23-percent rebound after the industry trough from 2001 to 2003, according to the researcher.

"This strong growth is not going to occur in the future," Norwood said.

Semiconductor sales are expected to expand by 6.4 percent annually in the six years to 2010 to US$318 billion, with the fastest growth in the Asia-Pacific region -- China in particular -- Norwood said.

Replacement demand for computers and mobile phones will be the main driving force in the market, although demand will be weak on cautious corporate spending due to concerns over oil prices, according to Gartner's research team.

Computers and mobile phones used more than 30 percent of chips produced last year.

In terms of regions, sales in the Asia-Pacific area will increase to US$166.6 billion in 2010 at a faster 9.5 percent annual growth rate, according to Gartner's prediction.

Asia-Pacific sales rise in relative terms to exceed half of the world's total chip sales in 2010, up from 42 percent of total chip sales last year, the researcher's statistics showed.

"China will be the focus among Asia-Pacific nations because of fast-growing manufacturing power and demand for electronics in the mainland," said Ben Lee (李輔邦), who tracks the Asian semiconductor industry for Gartner.

The Chinese semiconductor market will account for roughly 60 percent of the Asia-Pacific region in 2010, up from less than 50 percent this year, Lee said.
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