Semiconductor recovery stalled in February, says SIA

Semiconductor recovery stalled in February, says SIA
SAN JOSE, Calif. — The recovery in the worldwide market for semiconductors stalled in February, due to a combination of seasonal flatness and political uncertainty ahead of the Iraq conflict, according to the Semiconductor Industry Association (SIA). However, the industry organization still sees a sufficiently healthy second half to 2003 for the market to achieve double-digit percentage growth for the year.

Worldwide semiconductor sales totaled $11.8 billion in February 2003, a 3.3 percent decrease from the $12.2 billion in revenue reported in January 2003 and an 18 percent increase from the $10.0 billion recorded in February 2002, the SIA reported today (March 31, 2003).

The result is a second successive sequential monthly decline in the total value of the market (see March 3 story), a situation that is compounded by the fact that the SIA's Global Sales Report (GSR) is a three-month moving average of sales activity. The averaging is done to smooth out quarterly reporting anomalies that commonly exist at semiconductor companies.

"The recovery in the semiconductor industry that has been underway for more than fifteen months appears to have stalled in February," said George Scalise, SIA president in a statement. "Demand has softened in the markets that drove growth throughout the past year, including PC's, global wireless and consumer. The traditional seasonally flat first quarter has been further impacted this year by geopolitical uncertainty. We expect demand to strengthen as we approach the second half of the year resulting in growth for the year in double digits," Scalise stated.

Scalise went on to say that, "although capacity utilization at the leading edge is a strong 89 percent, excess capacity at the trailing edge is exerting pricing pressure and impacting revenue across the market at this time."

Sales in all geographic markets were down sequentially in February. Year-over year sales in February rose 17 percent in Europe, 35 percent in Japan and 26 percent in the Asia Pacific market, now the world's largest chip consumption market with a 36 percent share.

However, sales in the Americas market year over year were down 4.5 percent, reflecting the continued outsourcing of electronic equipment production and component purchases to Asia, particularly China. Total electronic equipment production in China is forecast to double in four years, from $130 billion in 2002 to $252 billion in 2006, while component purchases by contract manufacturers in China are forecast to triple, rising from $35 billion to $100 billion over the 2002 to 2006 period.