Future Horizons Predicts Chip Market May Grow by 20%

11/3/2005 - The semiconductor industry has got its house keeping in order during 2005. Growth in the next 12 months will be tied to demand and thus the strength of the world economy. This is the view of Future Horizons, Europe’s leading electronics analyst.

Future Horizons reports that three key variables for the worldwide semiconductor industry are now unusually aligned: excess inventory levels have been purged, capacity utilisation is starting to rise, and new capacity investment is moderate.

In a Special Supplement to its November Semiconductor Update Report, Future Horizons predicts that if the world economy remains strong in 2006, currently forecast at 4.3 per cent GDP growth by the International Monetary Fund (IMF), the chip market could see growth as strong as 20 per cent.

“A 4.3 per cent world GDP growth is a very big if, given the inevitable slow down in consumer spending, but then it is the consumer that has been driving growth since the 2001 crash and we are thus not mentally able to believe business will finally pick up spending again,” said Malcolm Penn, CEO, Future Horizons.

“The IMF clearly believes that believes that business has the capacity to do this, and that the transition will be smooth. If this is the case, the chip market will boom. We have seen a semiconductor market correction in 2005 from which the industry can bounce back fast if the economy remains strong,” added Penn.

However, if the global economy slows though, Future Horizons says that it will bring the semiconductor market down. A global recession in 2006 would tip the electronics market strongly negative; a slowdown to between 3.0 to 4.0 per cent GDP would reduce the growth to single digits or even shrinkage if the collapse is severe.

Future Horizons reports that growth in the semiconductor industry for 2005 is likely to be around 8-10 per cent. It says that while this represents a dramatic slowdown from the 28.0 and 18.3 per cent growth of 2004 and 2003 respectively, nonetheless the slowdown is a structural market correction and not a full-blown semiconductor recession.

The Future Horizons Semiconductor Update Report Special Supplement is available from Future Horizons, e-mail report@futurehorizons.com.

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.

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