Semiconductor group cuts chip figures

A leading semiconductor industry group has scaled down its forecasts for global sales growth in 2003 and 2004 because of the sluggish world economy and the impact of the deadly SARS virus.

The World Semiconductor Trade Statistics (WSTS) group now expects the chip market to grow by 11.5 per cent to $156.9 billion (€134 billion) in 2003, rather than the 16.6 per cent it forecast last October.

"This latest forecast represents a shift in the timetable for an economic recovery," said Mr Yoshihiro Todokoro, head of the WSTS Japan council and general manager at Matsushita Electric Industrial.

A London-based analyst at a major investment bank said that even the downgraded WSTS forecast was bullish compared with consensus expectations in the City.

"The 11.5 per cent growth forecast is still too high. We're looking at high single-digit growth.

"The fundamentals of the chip industry have not changed in recent weeks," he said.

Chips are the brains of many electronic devices, from personal computers and cellphones to cars and toys.

The chip industry is recovering from its worst-ever downturn in 2001 and early 2002. The downgraded growth projection comes after weaker-than-expected global chip sales in April.

Sales were flat compared with March and up just 9.7 per cent from the same month a year ago, compared with growth rates of more than 20 per cent earlier this year.

But there are signs that sales might be improving.

Singapore-based chipmaker Chartered Semiconductor Manufacturing said this week that strong demand for a new generation of high-end chips used for computer memory and graphics had helped narrow its quarterly loss forecast.

Taiwan Semiconductor Manufacturing, the world's largest contract maker of microchips, said last week that shipments would surge about 25 per cent in the second quarter due to increased consumer demand.

Goldman Sachs recently suggested demand for computer memory chips could rise and prices recover following low inventories.

The WSTS said 2003's 11.5 per cent rise will be succeeded by 18.4 per cent growth in 2004, down from an earlier prediction of 19.2 per cent, and 7.9 per cent in 2005, up from 2.5 per cent.

"As far as the growth rate goes, we expect to peak out in 2004," said WSTS council head Mr Todokoro.

Chip sales in the Asia-Pacific region would continue strong, the WSTS said. After a 28.5 per cent rise in 2002, the region is expected to see demand grow an additional 13.3 per cent in 2003 and another 22.3 per cent in 2004, Japan is expected to see sales growth rates outperform all regions in 2003, with projections of a 17.8 per cent rise, helped by strong sales of digital cameras and DVD players, the organisation said.

Sales in Europe are seen rising 14.1 per cent in 2003 but demand in the US is expected to remain flat, up just 0.1 per cent this year.

The data from the WSTS are based on information from 68 major chipmakers worldwide.