SCIENCE

SAN JOSE, CA -- After two years of semiconductor growth, worldwide semiconductor revenue is projected to be $168.1 billion, a 26 percent decline from 2000, according to the latest forecast by Dataquest Inc., a unit of Gartner, Inc. (NYSE: IT and ITB). In 2000, worldwide semiconductor revenue totaled $226 billion. "There are few signs of growth in design wins. Component prices and lead-times are still low, and electronic system component demand is weak," said Mary Olsson, chief analyst for Gartner Dataquest's worldwide semiconductor group. "Based on guidance and early reports from some of the larger bellwether companies involved in PCs, storage and communications, the second half of 2001 will be dismal for the semiconductor industry." The biggest uncertainty for the semiconductor industry is when will the decline stop. Gartner Dataquest analysts said price stabilization, longer device lead times and improved demand for memory products are the industry's indicators that signal turning points in semiconductor cycles. Overall semiconductor prices were still declining in May and June of this year. Overall memory pricing remains under pressure. In the analog sector, prices have been stable for proprietary analog products (both general-purpose and application-specific standard products (ASSPs). Gartner Dataquest analysts said lower unit sales are responsible for revenue declines. Going into the third quarter, there are varying developments across applications markets. Although overall growth in the consumer applications sector dropped from the two previous years of strong growth, sales of consumer application products in the United States is strong. Video game hardware, software and accessories sales increased in the first half of 2001 in the U.S. consumer applications sector. The seasonal demand cycle for PCs and cellular handsets has not kicked in, and there is still too much inventory on the shelves, but Gartner Dataquest analysts pointed to some signs of hope. "There are some great back-to-school PC bundling opportunities. There are also indications from the Asia/Pacific region that orders from American and European companies for motherboard, notebook and even cellular phones are increasing," Olsson said. "These increases may not be significant, but it looks like the bottom for some semiconductor and systems companies was hit in the second quarter of 2001." This research is produced by Gartner Dataquest's Semiconductors Worldwide group. This research group combines memory, microcomponents, logic, ASIC, analog, discrete device, RF and optical segments into a complete industry picture. Products, suppliers, startups, technologies, regional consumption, applications and emerging technologies are all covered in this broad program. To subscribe to this service, please call 408-468-8000. Reports can be purchased on the Internet at www.gartner.com