Semiconductor shortage fear

Recovery likely, but shortages in certain sectors may hinder progress

Long-term recovery in the semiconductor arena looks increasingly likely, but severe shortages in certain sectors may kick in as soon as the first quarter of 2004.

The good news that the recovery is picking up speed comes from both the Semiconductor Industry Association (SIA) and market watcher Gartner.

The SIA announced that worldwide sales for semiconductors totalled $12.5bn in May, up two per cent on April and almost 10 per cent higher than sales in May 2002. This is the third month of consecutive growth.

"The SIA's forecast growth of 10.1 per cent for the year 2003 is on track, with this uptick in May," said George Scalise, president of the SIA.

"As Sars and the geopolitical issues come under control, we expect to see demand in all geographic sectors, especially China, strengthen in the second half of the year."

Gartner claimed that worldwide wafer fab use is on the rise, with semiconductor unit demand closing in on the peak levels of 2000 for the first time in three years.

"Overall use should cross the 85 per cent mark during the second half of the year," said Klaus-Dieter Rinnen, managing vice-president of Gartner's semiconductor manufacturing and design research group.

"Leading-edge use should end the year at a projected 95 per cent. The speed at which we approach these respective thresholds will determine spending in the second half of this year."

The expected growth in demand is going to come at a price, however, according to Joe D'Elia, research director at iSuppli.

"Once you get above 85 per cent utilisation you are in a shortage situation. If you start getting above 90 per cent you're approaching panic proportions," D'Elia said.

"While we definitely see use going up for the rest of this year, we are being more realistic about the levels."