Chip sales on track to set new record

10-06-2004

by Martin Lynch

The global semiconductor market is healthy again and growing faster than expected, according to a report by the Semiconductor Industry Association (SIA).

The 2004-2007 mid-year forecast is projecting stronger-than-expected growth of 28.6 percent for 2004 and a compound annual growth rate of 10.4 percent through 2007. Worldwide sales of chips will grow to USD214 billion this year, surpassing the previous record of USD204 billion in 2000. The current forecast goes on to project sales of USD223 billion in 2005, USD221 billion in 2006, and USD247 billion in 2007.

Growth is being driven by strong demand in a range of sectors, including PCs, mobile phones, consumer electronics, wired and wireless telecommunications infrastructure, and the automotive sector. The growth in PC chip sales for 2004 now stands at 13 percent, up from an earlier forecast of 11 percent. Unit sales of chips for mobile phones are projected to grow by 15 percent this year, thanks largely to the popularity of models with digital cameras, colour displays and enhanced data capabilities.

"The industry is experiencing substantially stronger than expected growth in 2004 as a result of underlying strength in a broad range of end-use markets," said SIA president George Scalise. "We now expect that worldwide industry sales will surpass the previous record one year earlier than previously projected."

"For the longer term, we project a compound annual growth rate of 10.4 percent through 2007, when we expect that worldwide sales will reach a quarter of a trillion dollars," he added. "While this growth rate is lower than the historical growth rate of the past several decades, it represents very healthy growth for a USD200-plus-billion industry."

Consumer electronics will continue to be a strong driver of semiconductor sales, according to the SIA. It claimed that the market for digital cameras is now larger than the market for traditional film cameras, and it will grow by 27 percent in 2004 compared to an earlier forecast of 14 percent growth. The digital video recorder (DVR) sector is also experiencing explosive growth, recording almost triple the unit sales of 2003.

Although the future may look bright for the semiconductor industry at the moment, the SIA wants the US to set up a Nanoelectronics Research Institute to develop the next generation of chip technology before semiconductors reach their physical limits. Researchers claim that current chip technology, known as CMOS, will hit the performance wall in 15 years. After that, chip technology will have to get much smaller and be able to utilise technology that is measured in nanometres -- 1 nanometre is 1 millimetre divided by 1 million.