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Chip Sales Expected to Increase Semiconductor Revenue Growth by 18 Percent in 2004
Jan 6, 2004
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Market researcher IDC forecasts an 18-percent jump in chip sales in 2004, driven by double-digit increases in PC and mobile phone shipments.

Rising at a compounded annual rate of 12.5 percent, revenue is expected to increase from U.S. $160 billion in 2003 to $282 billion in 2008, the firm projects.

Stronger than expected mobile phone and PC shipments have stabilized ASPs and increased capacity utilization rates among suppliers. IDC expects that unit shipments will grow in double digits this year and next year for both mobile phones and PCs, which will drive a healthy growth cycle for more than one-half of the semiconductor industry.

From a regional perspective, China, as the largest consumer of mobile phones and the second largest consumer of PCs, will continue to drive mobile phone semiconductor and PC semiconductor growth most of all. Pressure on OEMs and chip suppliers by investors to increase profits and revenue has been a driving force in a general industry trend toward outsourcing.

"As a result of this ongoing trend, China has become a fertile ground for disruptive innovation as its low-cost suppliers naturally aspire to move up market," Mario Morales, vice president of IDC’s Semiconductor research at IDC, said in a written statement. IDC expects these emerging Chinese semiconductor companies will play a key role in shaking up the competitive ranks among OEMs, original design manufacturers (ODMs), and semiconductor suppliers during the next 5 years, he said.

"Mainland Chinese semiconductor demand currently represents more than one quarter of the $60 billion total for Asia/Pacific and will account for almost half of the entire region by the end of our forecast period," Mr. Morales added.

IDC finds the following are key trends to watch in this market:

  • Mobile phone shipments (including PHS/PAS) surpass 530 million units this year, while PC shipments grow by 11 percent, surpassing 152 million units. IDC expects double digit growth in units for both markets in 2004.
  • In 2003, Japan surpasses The Americas as the second largest consuming region in the world. Japan's growth is led by export growth, while domestic demand remains muted.
  • Asia/Pacific region becomes the dominant region for PC and mobile phone demand and production with China accounting for the bulk of this region's growth.
  • Taiwan begins to aggressively aggregate IP. Taiwan and China drive fabless start-up activity, while the U.S. and Europe slow down.
  • Capital spending for suppliers grows strongly in 2004 after a few years of decline.
  • Suppliers focus on 2.5G, wireless land area network (WLAN), and broadband and cellular infrastructure. Wireless and analog IP become essential building blocks.
  • IP houses and fabless wired communication chip suppliers experience the most visible shakeout, while flash memory, analog, and wireless semiconductor vendors also consolidate.
  • Traditional business models evolve to benefit those that are focusing on IP, brand, usage models and customer service. Successful suppliers continue to emphasize more on market segmentation, brand, and utility as technology becomes more transparent to consumers.

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