After a lull this year, growth in the semiconductor industry should resume in 2006 and continue to nearly the end of the decade, according to Semico Research, a Phoenix-based market research firm.
Semico president Jim Feldhan said he expects worldwide semiconductor sales to decline about 2 percent this year to $208 billion, but sales are expected to resume growing next year and continue rapid growth up to 2009 as new consumer products that use microchips penetrate the market.
Feldhan, who spoke Tuesday at the annual symposium of the Semiconductor Environmental, Safety and Health Association in Scottsdale, said his latest outlook for this year is slightly better than in January, when he projected a 4 percent decline this year. That’s because first quarter sales were stronger than most analysts anticipated at 0.8 percent sequential growth and 13 percent above the same period a year ago.
He expects sales to decline sequentially in the current quarter but turn slightly positive in the second half, leaving a small overall decline for the year.
"In the best case, we could grow about 1 percent this year, but essentially it is flat," he said.
This year’s slowdown is coming after 28 percent growth last year, which lifted semiconductor sales above the level of 2000, the last strong year before the industry plunged into the deepest depression in its history.
He attributed the latest slowdown to a buildup in inventories that needed to be worked off and a slight softening in consumer demand for electronic products.
Feldhan believes the industry will recover later this year because new technologies will encourage businesses and consumers to upgrade. One example he cited was dual core microprocessors being developed by Intel Corp. and AMD that will give personal computers faster performance while using less power and generating less heat.
Dual core processors will become available this year, but they will have their
biggest sales impact in 2006 and 2007, he said.
Fuel cells, which will allow extended use of mobile devices such as cell phones and notebook computers without the need to frequently recharge batteries, will make an impact in 2007 and 2008, he predicted.
Feldhan also sees continuing growth in demand for consumer products such as HDTVs, digital cameras, MP3 players, DVD recorders, Wi-Fi and home networking technologies, all of which should drive future semiconductor sales.
And if hybrid autos catch on, they’ll use about double the volume of semiconductors in conventional vehicles, he said.
"There are great opportunities out there," Feldhan said.
Semico’s forecasts are similar to those of other market analysts, including the Semiconductor Industry Association, which predicted a flat year in 2005.
Among other forecasts are 4.7 percent growth by iSuppli, another semiconductor market watcher; a 2 percent decline by IDC, also a research firm; and 1.2 percent growth by World Semiconductor Trade Statistics.