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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