Worldwide chip revenues are expected to climb 22.6 percent compared with last year, analyst firm Gartner Inc. said in preliminary estimates released this week.
In estimates that the firm said were deliberately conservative, Gartner predicted that the market would top $217 billion in 2004, prompted by a PC upgrade cycle and additional spending in wireless communications. The boom-and-bust cycle will peak in 2005, when the chip industry should reach $245 billion, the firm said. "A tighter supply environment in 2004 will bring increased revenue and profitability to the industry, and as semiconductor vendor financials improve, capital spending should increase," said Richard Gordon, research vice president for Gartner, in a statement. "Overall fab utilization is currently running in excess of 95 percent, which is about 10 points higher than the traditional trigger point for additional capital spending in the industry."
Gartner said that the firm was concerned that demand would continue to increase, although supply constraints will keep prices high in the short term. But as companies spend money to upgrade their equipment in 2005, the available supply should increase, and prices should begin to fall.
Gartner said that in 2006, the chip industry is expected to contract by about 2.6 percent from 2005, generating revenues of about $240.2 billion.