After coming off one of its worst years in history, the semiconductor industry continues to show signs of recovery.
The industry finished last year with total sales of $125.6 billion, a decrease of 8.4 percent from year-end 1997 sales, according to the Semiconductor Industry Association. The industry was expected to post decreases in sales for 1998 of more than 10 percent, but it was boosted by a slight rally during the fourth quarter.
Dataquest Inc., a unit of Gartner Group Inc., said the worldwide semiconductor market suffered its biggest decline since 1985, when the market declined by more than 15 percent. Despite the sluggish year for the overall semiconductor market, Dataquest said the market for digital signal processors grew 5.4 percent due in part to increasing rollouts of digital mobile phones and cellular infrastructure.
So far this year the market appears to be building on the rebound it began late last year.
Worldwide sales of semiconductors reached $11.1 billion in January, a 1.2 percent increase from sales of $10.97 billion in January 1998, marking the second-highest total for January in nearly a decade, said SIA. Sales for February increased 3 percent to $10.88 billion, compared with sales of $10.54 billion during February of last year, although the figure represented a slight decline from sales in January of this year.
“This month’s numbers show signs of continued industry growth that we expect will remain steady throughout the year,” said Doug Andrey, director of information systems and finance for SIA.
Semiconductor industry executives are optimistic about industry growth during the next couple of years, said a new survey conducted by Ernst & Young L.L.P. About 84 percent of respondents said they expect the industry to return to its historically high growth rate within two years, while nearly half thought the market would bounce back in the next 12 months.
“The survey shows that the semiconductor industry is on the rebound, a confirmation of what we have been expecting for next year,” said Stephen E. Almassy, national director of Ernst & Young’s Technology, Communication and Entertainment practice.
The executives surveyed differed on their beliefs about what will cause growth in the semiconductor industry. About 42 percent said technological innovation will provide the most significant competitive advantage for companies, 22 percent said partnerships and 29 percent said being first to market will be important factors. Nearly all of those surveyed agreed demand for higher processing speeds will increase during the next five years.
In addition, 38 percent of respondents indicated telecommunications infrastructure is expected to be a key factor for semiconductor industry expansion during the next several years.
“It has been clear for some time that the Internet, data networks and wireless technologies are experiencing hyper-growth,” said Patrick Hyek, a Semiconductor Industry Services partner at Ernst & Young. “What our analysis has shown is that much of the future expansion will simultaneously drive and be facilitated by advances in semiconductor technology.”
In other semiconductor news, Dataquest recently named Lucent Technologies Inc.’s Microelectronics Group the world’s fastest-growing top-20 semiconductor business. Dataquest said Lucent’s semiconductor growth was 15.9 percent last year at a time when the rest of the market was down.
Lucent attributes its success to a focus on providing system-on-a-chip solutions to the communications market.
