Semiconductor market set for rebound

Motorola Semiconductor is positive about the long-term Asian market, despite the current economic climate.

Motorola Semiconductor is positive about the long-term Asian market, despite the current economic climate.

Expectations are in line with market analyst Dataquest's prediction that demand for semiconductors will pick up next year.

Joe Yiu, Motorola's corporate vice-president and general manager of Asia-Pacific and Japan, said the industry was facing the worst downturn in its history, caused by excessive build-up of inventory during growth periods and by economic uncertainty since the 11 September attacks in the US.

He remained upbeat, however, about the semiconductor market's prospects, particularly for Asia.

"China is still a high growth market, lower interest rates in the US should prompt consumer spending and, generally, semiconductors are becoming increasingly integral to our daily lives," Yiu said.

Consumer electronics continue to sell well, especially in Japan, which in turn generates demand for chips, Yiu said. Mobile phone ownership also continues to grow unabated in China and car designs rely increasingly on chip technology.

Magnetoresistive random access memory (MRAM) will come to market in 2004 and will allow users to keep applications suspended even while a PC is turned off, Yiu said. As such, MRAM will eliminate lengthy application boot-up times.

Motorola Labs, the research arm of Motorola, has already demonstrated a working prototype of an MRAM chip. IBM, Honeywell, Hewlett-Packard and Intel also intend to bring MRAM to market around the same time.

According to Dataquest, global chip demand will show a 35% decline during 2001, to $147bn (£100bn). Demand for semiconductors will pick up next year, with revenue from global chip sales rising 3% to $152bn. By 2003, chip demand is expected to pick up further, with Dataquest predicting a 30% increase in sales.

The expected upturn will be driven by improvements in the overall economic environment, which will result in growing demand for PCs to replace aging equipment. The expected roll out of third-generation phone services during 2002 and 2003 will also spur demand for mobile handsets, Dataquest said.

Dataquest's prediction of a modest recovery during 2002 is largely in line with industry expectations. Chip makers such as Taiwan Semiconductor Manufacturing and United Microelectronics believe the drop in demand for chips has bottomed out. They predict modest growth in demand during the fourth quarter.

World Semiconductor Trade Statistics (WSTS), a non-profit association of chip makers, announced last month that global semiconductor sales in 2001 are expected to decline by 32.1% to $138.8bn, down from the group's May prediction of a 13.5% decline to $176.8bn.

WSTS's revised forecast for 2001 is based on the expectation of a moderate upturn during the fourth quarter of 2001 that will carry over into 2002. Global semiconductor sales are expected to rise 2.6% during 2002.

The estimates of 18.5% growth in 2003 and 15.1% in 2004 by WSTS are more conservative than those of Dataquest.

Read more on Business applications