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Chip biz recovery shuffling forward

We told you so, cry analysts

Having had a chance to ponder the numbers, market researchers are cautiously forecasting continued recovery for the chip industry.

"Noteworthy improvements in market conditions during the last few weeks confirm that the industry is continuing its recovery as expected and is about to enter a more accelerated growth phase," said Gartner today.

The reason? Wafer fab utilisation is now over 80 per cent, foundry wafer pricing is up and silicon demand is increasing, the researcher notes. Higher utilisation is being experienced by chip packaging and assembly specialists too.

Driving the recovery going forward will be a revival of corporate IT spending, for which there are early signs, Gartner said. Alongside that, consumer spending hasn't tailed off any further. However, there remains excess capacity in the telecomms sector, so with inhibited spending there, we shouldn't expect the chip business to grow rapidly, the company warned.

Gartner is still looking at 11.2 per cent chip market growth this year, rising from 2002's $156 billion to $173 billion.

Gartner can't help trying to pull one over on its rivals by claiming it has been forecasting low double-digit growth since Q4 2002 - long before other market watchers were forced to downgrade their forecasts from just under 20 per cent to around ten per cent.

Advanced Forecasting goes one step further: it accurately revealed the truth "more than a year and a half ago", the company claimed today. It even states, effectively, that if the industry had paid it some attention in 1999, the 2000 recession would have been much less severe.

"Advanced Forecasting predicted in early 1999 that the growth rate of underlying demand for ICs would slow significantly in the summer of 2000, warning the industry to slow its exaggerated momentum," the company boasted. "Instead of slowing down, the momentum continued, leading to inflated targets, overbookings, overcapacity, and inventories, causing the longest and deepest recession in semiconductor history."

"Those heeding our warnings about the slow down in growth fared much better than those choosing to ignore them," the know-it-all added.

AF sticks to its July forecast that Q4 will show "accelerated growth". It too points to high fab capacity utilisation levels and chip sales as signs of recovery, noting that figures for the later stand at "five per cent below their all-time peak of 7.7 billion units". ®

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