4/9/2004 - The semiconductor industry may ruin its current return to growth by overshooting the sector recovery, Europe's leading semiconductor analyst Future Horizons warned.
Any overshooting of the recovery in 2005 would trigger another downturn in semiconductors, according to the Future Horizons Semiconductor Monthly Update Report.
The total worldwide market for integrated circuits - the bellweather of the semiconductor industry - was up 25.6 per cent over the 12 month to January 2004. Unit demand over the same period was up 31.4 per cent.
Future Horizons predicts that the demand for semiconductors will outstrip supply well into 2005, driven by the automotive, consumer and mobile phone markets. It believes that this analysis flies in the face of perceived wisdom, which says that the industry will inevitably suffer a downturn at the end of 2004 as it reaches the end of an 18 month growth cycle.
"Confidence is back in semiconductors and the upswing should outlive previous positive periods," said Malcolm Penn, CEO of Future Horizons. "But if the industry over invests in production and creates flabby inventory levels as it has traditionally done, another downturn will begin to bite late in 2005 or early 2006.
"It is impossible to fine tune fab capacity with market demand, so if these factors occur the industry will inevitably overshoot its recovery and so trigger a downturn," said Penn.
Over investment in new fab capacity is the semiconductor industry's Achilles heel, according to Future Horizons. This capacity takes months to bring on stream, whereas demand for integrated circuits can change overnight.
Future Horizons cautions the electronics industry to watch for signs of over ordering as OEMs, distributors and CEMs build up inventory, coupled with planned fab capacity and the speed at which it will come online.
The Future Horizons Semiconductor Monthly Update Report is published monthly and available from Future Horizons priced at £1,000 for a single user license or £2,200 for a multi-user intranet version.
About Future Horizons
Future Horizons, founded in 1989, is Europe's leading semiconductor analyst. It provides market research and business support services for use in opportunity analysis, business planning and new market development. Its industry information seminars and Forums are widely considered to be the best of their kind. Future Horizons publishes a series of monthly, half-yearly and annual market reports, with emphasis is placed on the worldwide microelectronics and electronics industry and the European market environment. See www.futurehorizons.com for further information.
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