Chip growth slows down

Worldwide semiconductor revenue growth is starting to slow in the second half of 2004. Although the slowing will affect income mainly during the fourth quarter, the second half of 2004 is still generating strong growth of 10% on top of the increase seen in the first six months of the year, according to a newly-revised outlook from iSuppli's Electronic Components Forecast service.

Global semiconductor sales grew by 31.4% in the first half of 2004 compared with the first half of 2003, but second-half sales will decelerate to 20% compared with the second half of 2003.

In light of this, iSuppli has reduced its revenue growth forecast for 2005 into single digits, at 9.6%, down from 11.8% previously. iSuppli also has adjusted its semiconductor revenue forecast for 2004 to 25.4%, up from 24.4% previously.

With sales growth flattening at the end of 2004, iSuppli expects that semiconductor revenue in the first half of 2005 will grow by less than 2% compared with the second half of 2004.

The second half of 2005 will generate more growth, with chip sales rising by 6% compared with the first half.

The rapid decline in industry growth is due to softening prices for chips as well as a slowing in the electronic equipment markets.

Revenue growth in the electronic equipment market will slow to 5.8% in 2005, down from 9.8% in 2004, iSuppli estimates.

Two important products are the major culprits behind the equipment and chip slowdown: mobile phones and notebook PCs. However, the softening sales of these is only a symptom of the general deceleration of the electronics market, spurred by a tentative global outlook and the weakening of consumer upgrade purchases.