The rapid rise in energy costs, combined with a growing excess of manufacturing capacity, has prompted iSuppli to trim its forecast for 2005 semiconductor sales and to modify its outlook for the industry’s present growth cycle. Now the researchers predict that global sales will rise to $232.7bn in 2005, up 2.4% from 227.2bn in 2004. Chip sales growth is also expected for 2006, with revenue rising to $242.8bn, up 4.3% from 2005. The previous forecast was for 5.9% growth in 2005. The company now believes that 2005 will mark the low point of the present semiconductor cycle, and that growth will accelerate during the following years. After a marginal rise in 2006, chip sales are expected to rise by double-digit percentages in 2007, 2008 and 2009.
While the impact of hurricane Katrina on the semiconductor industry remains unclear, iSuppli believes that, at the very least, the catastrophe will exacerbate the market’s energy problems in the short term. In a troubling sign for the industry, chip suppliers are continuing to increase production – despite slowing growth and weakening prices. Global semiconductor capacity is expected to rise by 3.1% in the third quarter. Meanwhile, semiconductor manufacturing capacity utilization will increase to 86% in the third quarter, up from 83% in the second. “With the significant amount of capacity that is available, if demand does not significantly increase, the fourth quarter will experience a slowdown in manufacturing run rates”, warned iSuppli’s Len Jelinek. While the near-term outlook for the semiconductor industry is dimming, the long view appears somewhat brighter. However, the industry is unlikely to achieve the kind of robust recovery that it has seen in the past. A flattening in the fourth quarter will reportedly lead into a very slow first half for 2006. iSuppli expects that the slowing trend will be less of a problem in late 2006 and the market will move forward in 2007, but at a somewhat slower recovery pace than seen in the past.
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