Chip group predicts strong growth

Demand for wireless products and growth in the Asian market will boost semiconductor sales by close to 20 percent in 2003 to $169 billion, a figure that will rise to $206 billion in 2004, according to the Semiconductor Industry Association.

The semiconductor industry is in the middle of one of its three-year growth cycles, said George Scalise, president of the SIA, a trade association for semiconductor companies. Typically, chip sales grow for three years, then contract for two to three years before starting to grow again.

After falling to $138.9 billion in 2001, semiconductor sales for the entire industry grew by 1.3 percent to $140.7 billion in 2002.

In 2003, revenue will accelerate to $169 billion, a 19.8 percent increase and grow another 20 percent to $206 billion before flattening out in 2005.

"2002 was the recovery year for the semiconductor industry for this particular cycle," said Scalise.

SIA figures, though, have proved optimistic in the past. Several companies--including Intel and Taiwan Semiconductor Manufacturing Co.--have also said that they are cutting back on installing new equipment in 2003, a move that some analysts have said is an indication of less than stellar demand.

Wireless will be one of the chief forces behind the increase in demand. Sales of chips for wireless products will grow by 35 percent annually over the next five years, according to the SIA.

The Asian market is also growing rapidly. Chip sales to Asia have more or less doubled since 1997, Scalise said. The region now consumes 40 percent of the world's semiconductors. Part of the consumption is driven by growth in China and other countries. Many of the chips sent to Asia, though, are eventually re-exported to other regions.

PC and server sales will also likely increase, said Scalise. "Software improved in the middle part of 2002," he said. "We think that the hardware size will begin to grow in 2002 for the first time since 2000."