The semiconductor industry remains on track to record a
significant increase in revenue during 2004, according to Gartner's
latest forecast. After that, however, the outlook takes a turn for
the worse.
Chip suppliers should take in $226bn (£125bn) in revenue this
year, an increase of 27% on 2003, said Richard Brown, research
vice-president for Gartner.
But revenue growth will slow considerably next year, to
between 5% and 10%, and could also contract in 2006, he said.
Gartner said 2004 has been a strong year for chipmakers, but the
industry cannot sustain a 27% growth rate as the PC replacement
cycle wanes in 2005, Brown said.
"We believe we're entering a fairly traditional semiconductor
cycle. Each cycle is different, but they are created by imbalances
between supply and demand," he said.
Chipmakers have invested billions of dollars in new
manufacturing plants and technologies which will increase the
supply of chips just as demand starts to slacken toward the end of
next year, he added.
Rising inventories among chipmakers have worried financial
analysts in recent weeks.
Dell and Hewlett-Packard were happy with the performance of
their PC divisions in the second quarter as corporations continue
to slowly replace ageing PCs.
The second half of the year is usually the strongest for PC and
chip companies, and industry bellwether Intel expects to post a
significant increase in third-quarter revenue compared with the
previous year.
Tom Krazit writes for IDG News Service