Global semiconductor industry to grow at 9.5%, says Gartner

The worldwide semiconductor market is gradually improving and cautious investment in incremental capacity additions will keep the market on a course of modest growth during the next few years, according to the latest quarterly update by Gartner.

Worldwide semiconductor revenue is forecast to reach $257.7 billion in 2006, a 9.5 per cent increase from 2005 revenue of $235.3 billion. In 2005, the market grew 7 per cent. A mild slowdown is expected in 2007 with growth of 7 per cent, followed by a cyclical market peak in 2008.

"The supply of semiconductor devices is becoming more constrained, and the downward pressure on the average selling prices of devices seen in 2005 has eased," said Andrew Norwood, research vice president for Gartner's semiconductor research group. "Any lengthening of device lead-times in coming months will be seen as further evidence of a tightening market," he said.

Contrary to consensus expectations, Gartner Dataquest's Semiconductor Inventory Index, which is based on analysis of semiconductor inventory levels throughout the supply chain, showed a further reduction in semiconductor supply chain inventory levels in the fourth quarter of 2005.

"Low and declining inventory levels naturally lead to increased production to build inventories in anticipation of future demand, but in the face of elevated manufacturing capacity utilisation rates, increased capital spending will be required to facilitate a rise in output," said Norwood. "Since our last capital spending forecast in December 2005, significant increases in spending for 2006 have been announced, suggesting growth in capital expenditures of about 10 per cent this year."

These recent indicators suggest a more positive, albeit still cautious, outlook for semiconductor market growth, which is reflected in slight upward revisions to the forecast.