Industry sees 1995 at $114.6B; semiconductor shipments expected to increase 15%

Electronic News, Oct 31, 1994 by Jim DeTar

SAN JOSE, CALIF.--The coming year's semiconductor industry shipments will rise a moderate 15 percent to $114.6 billion at the end of 1995. That growth rate is about half the 25- to 30 percent growth expected this year, which will put current-year total worldwide chip shipments at $99.9 billion, according to data compiled by World Semiconductor Trade Statistics (WSTS) released last week by the Semiconductor Industry Association (SIA).

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Although stability is among the watchwords these days, the industry still is projected to grow 13.8 percent in 1996 to $130.4 billion worldwide, 18 percent to $153.8 billion in 1997, and to reach $200 billion by the year 2000--if not before. That picture is quite a bit rosier than last year's forecast when the WSTS/SIA was predicting a relatively miserly 5.3 percent growth rate for 1995, and said it didn't expect to hit the $100 million water-mark until 1996.

Texas Instruments vicechairman William P. Weber, who delivered the forecast this year at the SIA's annual dinner, here, pointed to a moderation of industry peaks and valleys that he said indicates greater predictability, sustainable growth and less volatility than in the past.

"First, demand is increasing and that provides higher control over the market. Another thing is that there is a more stable environment in terms of demand and supply, which has been more stable than the last decade. There is greater attention to cash flow, we have reduced the lead times and cycle times, and we are at record low levels in terms of inventory," he said, suggesting these are all factors that mean moderation is here to stay for awhile.

The global statistical forecast also indicates that the North American market will remain the world's largest in 1995, growing 33 percent to $37.8 billion, up from the $33 billion expected this year, and nearly double the $20 million market the SIA predicted for all of 1993 at its October 1992 meeting. Actual North American shipments in 1993 totalled $24.7 billion (EN, Nov. 1, 1993). The North American market is projected to maintain its current 33 percent growth rate all the way through 1997 when North American sales are expected to hit $51.7 billion.

At the same time, the Asia-Pacific (excluding Japan) region is expected to move ahead of the European market by 1997. For 1995, Asia-Pacific sales are projected to be $21.8 billion, up 16.4 percent from this year's $18.7 billion. By 1997, Asia-Pacific will reach $30.9 billion. Europe is expected to post sales of $22.5 billion in 1995, up 17.7 percent from $19.1 billion this year. By 1997, Europe should have grown to an estimated $30.3 billion.

Japan's sales will continue to slowly recover, the forecast indicates, growing 9.3 percent from this year's $29 billion to $32.5 billion in 1995, up 10.6 percent in 1996 to $36 billion, and 13.8 percent in 1997 to $40.9 billion.

Other highlights of the forecast include a continued gain of worldwide share by MOS microprocessors and memory products, which had 37.8 percent of the market in 1992, but are projected to capture 58 percent by 1997 as telecommunications and consumer applications will make greater use of MPUs and memory.

Mr. Weber said that chip content in electronic equipment averaged 4 percent in the 1970s; rose to 7 percent in the 1980s; achieved almost 10 percent during the first three years of the present decade; and are expected to rise to 25-to 30 percent in notebook and sub-notebook computers in 1995 and beyond. "We believe this trend will continue as the telecom infrastructure shifts to digital over the next few years," Mr. Weber said.

Mixed signal, digital signal processing and field programmable devices will reach approximately $15 billion by 1997, according the WSTS/SIA.

In order to achieve the predicted stable, long-term growth pattern, the global semiconductor industry will be required to invest more than $150 billion in the next few years to achieve production at 0.25-micron and below, the SIA said. New generations of MPUs and software are expected to double or triple the memory per computer, and non-computer applications for memory will emerge.

Gilbert F. Amelio, president and CEO of National Semiconductor and immediate past chairman of the SIA board, said "15 percent of where we are now is $15 billion. Three years ago, $15 billion would have been 30- to 35 percent. We are still talking a large increment." He also hinted he thinks growth could be stronger than predicted. "A positive could be Europe and Japan. They have been soft in recent history."

There are those at SIA who disagree with the official forecast on some points, however. Echoing Mr. Amelio's thoughts on the possibility of Japan and Europe being bright spots, board member Wilfred J. Corrigan, chairman and CEO of LSI Logic, said "This is just my personal opinion and not that of the SIA but I think we are underestimating the recovery in Japan and Europe. I think 15 percent is low and I wouldn't be surprised to see it stronger."

Previously voiced themes--such as the continuing shortage of sub-micron fab capacity--were heard again, and new concerns arose--such as the changing relationships between suppliers and customers that are forcing companies to rethink the way they do business.