Semiconductor revenue flat

Revenue for the semiconductor industry will be between 0% and -5% in 2002 as the industry continues to struggle with demand issues, according to Dan Niles, director of semiconductor research for Lehman Bros.

"Semiconductor revenues have bottomed out and a slow recovery is coming," Niles said. "But there are signs that you are digging yourself out of a deep hole."

Niles does not believe that the strong consumer spending will continue to the point where it will have a cumulative effect with an increase in corporate IT spending. Comparing the latest cycle with 1985, which saw the PC bubble pop, plummeting the industry into its second-worst downturn ever, he said this recovery will be similar to that of the early 1990's when the recovery was slight.

"We are in a much bigger industry today where it is more difficult to make an impact," Niles said. "Few single consumer products are making a difference on the whole industry."

However, even flat revenue will look good compared to the decline in 2001, Niles said. He predicts revenue growth from December through May should come in at about 8%. But, the communications market continues to be problematic with very few signs of recovery and too much inventory still on the books, Niles said. He predicts high single-digit growth for PCs and wireless handset growth of 4%.

"The telecom industry is paying for the perfect harvest," Niles said. "The idea was, provide more and more bandwidth and the customers will come. They built all this capacity for transactions but those companies still have all that storage and servers that they are not using. Time will fix this problem."