NEW TRIPOLI, Pa.--Here's something unexpected.
A new forecast for 10% growth in chip revenues this year was issued today by a market researcher here, who claims that the semiconductor recovery is already underway but it's being clouded by misguided analysts and industry reports that focus on sequential drops in monthly sales.
"The semiconductor industry is up 4.4% for the first quarter of 2001 over 2000," said analyst Robert N. Castellano, president of The Information Network. "Few people realize this because the SIA (Semiconductor Industry Association) has been doing the industry a disservice by pointing to negative sequential monthly growth in every press release."
Castellano is boldly forecasting 10% growth in worldwide semiconductor sales to $224 billion in 2001, while nearly all other analysts are predicting a drop in chip revenues this year. In fact, some analysts and chip executives have recently begun predicting that 2001 could becom e the worst year in history for the semiconductor industry.
But Castellano disagrees. "The analysts are focusing on the PC and handset market and what's happening to Cisco. They should be focusing instead on the fact that more feature-laden products are requiring more chips, even though the overall growth of the end product may have slowed," Castellano said.
"Take flash memory for example, where new cell phones in 2001 are requiring twice as much flash memory at a time when demand is increasing for other consumer-oriented applications," he said, referring to digital cameras, MP3 audio players, set-top-boxes, antilock braking systems and other systems.
Castellano said the second quarter of 2001 will mark the "inflection point" for the entire semiconductor industry. The fab-operating chip giants--often referred to as "IDMs," for integrated device manufacturers--will bounce back before the troubled foundries, which will have to wait until late 2001 before their business segment recovers, he said. ID Ms have more than enough in-house capacity to produce ICs, while in 2000 nearly 35% of foundry revenues came from these chip giants, according to Castellano.
Here's another surprise--or at least an overlooked data point. "Despite the slowdown in the semiconductor market, the semiconductor equipment industry registered growth of 12% in the first quarter of 2001 over 2000," Castellano said. He is predicting that semiconductor equipment markets will end up growing this year with investments beginning three months after the semiconductor inflection point--presumably sometime around the start of the fall.