Global semiconductor market to fall 2% in 2005

The worldwide semiconductor market has entered a correction phase triggered by supplier expectations of high demand and resulting overproduction. This correction will not impact the 26% worldwide revenue growth in 2004 forecast by IDC, but it is expected to produce negative growth of 2% in 2005. IDC also forecasts the market will return to positive growth in 2006 and experience a five-year compound annual growth rate (CAGR) of 11.3% from 2003-2008.

Supplier expectations for a strong market led to a 48% surge in capital spending in 2004. However, significant variations in monthly demand forced manufacturers to slow production in the second half of the year. Despite these adjustments, 2004 will be a strong year overall for the semiconductor industry with total revenues reaching $210 bln.

IDC expects the first half of 2005 will be marked by increased price pressures, lower utilization rates, and greatly reduced capital spending as suppliers seek to help the market stabilize. A continuation of the corporate PC and mobile phone replacement cycles and growing demand for consumer electronics should help suppliers clear their lingering inventory and return to growth by the second half of 2005.