Chip market recovery in sight

The worldwide semiconductor market is continuing its recovery, with signs that the long overdue upswing in corporate sales is starting to happen, according to analyst Gartner.

The firm claimed the second quarter had been healthy for the market, and added that it was cautiously optimistic that the usual seasonal rise in demand was under way.

The market researcher predicted that the semiconductor market would reach $173bn in 2003, an 11.2 per cent increase over 2002's $156bn.

"Noteworthy improvements in market conditions during the past few weeks confirm that the industry is continuing its recovery as expected and is about to enter a more accelerated growth phase," said Richard Gordon, research vice-president at Gartner's semiconductor research group.

Gartner claimed that in front-end semiconductor manufacturing, silicon demand is increasing, overall wafer fabrication plant use now exceeds 80 per cent and foundry wafer pricing has firmed up.

In packaging and assembly, overall utilisation rates continue to increase on a monthly basis. In device markets, inventories are back to normal levels, pricing has stabilised and shortages of some critical components are now occurring.

"It is looking increasingly likely that the long-awaited corporate PC replacement cycle will be characterised by incremental increases in IT spending spread over a more prolonged timeframe than we have seen in the past," Gordon said.

"While this trend would underpin a sustained semiconductor recovery, it may act to temper headline annual revenue growth."

The upswing tallies with recent figures from the Semiconductor Industry Association (SIA), which claimed second-quarter chip sales of $37.6bn were up 3.2 per cent on Q1 and up 10.4 per cent on the previous year.

SIA president George Scalise said: "As predicted, the recovery is broad-based, and now is beginning to draw strength from computation, the largest end market for semiconductors, as well as the global consumer and communications sectors."