Report: Semiconductors in full health by 2003

A worldwide decline in the growth rate of PC sales will cause one of the worst global declines in the history of the semiconductor market in 2001, though the cyclical nature of the semiconductor market will begin to bring recovery in 2002, with the market posting an annual revenue growth rate of 31 per cent by 2003, a market study from Gartner Inc. predicted on Tuesday.

Revenues for the worldwide semiconductor market will drop 35 per cent in 2001 compared to 2000, while in the European market alone, semiconductor revenue will drop by 33 per cent to US$29 billion in 2001, Gartner said in a statement.

By 2002, the semiconductor market in Europe will be worth US$30 billion, the Gartner study said.

Gartner’s prediction of a modest recovery in demand during 2002 is largely in line with industry expectations, with chip makers like United Microelectronics Corp. and Taiwan Semiconductor Manufacturing Co. Ltd. both recently predicting modest growth in demand during 2001.

Driving the recovery will be the semiconductor intellectual property market, which the study predicted will post a compound annual growth rate of 38 per cent from 2000 to 2005. In comparison, growth in the worldwide semiconductor market for the same period will be 2.5 per cent, Gartner said. Companies in the intellectual property segment of the semiconductor market focus on developing semiconductor design and construction methods

Companies in the semiconductor intellectual property market include processor designer companies like Germany’s Infineon Technologies AG and U.S.-based Rambus Inc.

Another key factor in the resurgence of the semiconductor market is the opening up of the Chinese market, with China set to enter the World Trade Organization in 2002. The size of the market in China will drive up demand for products using semiconductors, such as PCs, as well as opening up new opportunities for semiconductor manufacturing, the study said.

As a result, it should be one of the top agendas for semiconductor manufacturers to figure out just how to capitalize on the market opportunities emerging in China, the Gartner study stressed.

Last, but by no means least, the expected rollout of 3G (third-generation) phone services during 2002 and 2003 will spur demand for mobile handsets, Gartner said. In the European market in particular, the semiconductor market can expect “significant” local production of automotive navigation equipment, digital set-top box and smart card products driven by demand in the region, Gartner said.