The chip industrys trade association said Thursday that it expects sales of semiconductors to finally recover from the dot-com bust. But the group advised that the formation of a national center for nanoelectronics research is necessary to keep the industry on its growth path.
The Semiconductor Industry Association (SIA) said it expects 2004 chip sales to grow 28.6 percent, to $214 billion, topping the $204 billion the industry recorded at the height of the dot-com boom in 2000.
But the agency also reiterated that chip sales are expected to grow only 4.2 percent in 2005 to $223 billion and actually decline by 0.8 percent in 2006 to $221 billion—the bottom of the next downturn.
The chip industry has slowly recovered from the steep drop in sales that occurred in 2001 and 2002, when the dot-com industry stumbled and sales of servers and other complementary hardware slowed as well.
The SIA said the chip industrys recovery will arrive a year earlier than expected. Companies such as Intel Corp., meanwhile, have reported record revenues as they have led the recovery.
“The industry is experiencing substantially stronger-than-expected growth in 2004 as a result of underlying strength in a broad range of end-use markets,” SIA president George Scalise said in a statement.
“We now expect that worldwide industry sales will surpass the previous record one year earlier than previously projected. For the longer term, we project a compound annual growth rate of 10.4 percent through 2007, when we expect that worldwide sales will reach a quarter of a trillion dollars,” Scalise said.
“While this growth rate is lower than the historical growth rate of the past several decades, it represents very healthy growth for a $200-plus-billion industry.”
Next Page: One linchpin is the amount of manufacturing capability being used.
Manufacturing Capability
One of the linchpins of the recovery is the amount of manufacturing capacity actually being utilized. About 93 percent of the available semiconductor manufacturing capacity is being utilized, the SIA reported, while 99 percent of all leading-edge sub-16-micron capacity is being used.
The danger, however, is that demand will still exceed the industrys ability to make chips, a key characteristic of previous booms.
Microprocessor sales are projected to grow by 17.7 percent to $32.3 billion in 2004 and to $37.0 billion in 2007, a compound annualized growth rate of 7.8 percent.
But the strongest growth is expected in the DRAM and flash-memory industries, which the SIA said would grow by 55.8 percent and 48.9 percent, respectively, in 2004. Total DRAM sales for the year should reach $26.0 billion, it said, while 2004 flash memory sales should reach $17.5 billion.
But a leading chip executive said Thursday that the United States must invest in nanoelectronics in order to keep pace with Moores Law, as well as investing in research efforts funded by other countries.
Researchers believe they will be physically unable to design semiconductor devices using todays silicon-based technologies 15 years or so in the future, and they say the necessary research must be done now to prepare for alternative means of manufacturing.
“The price for not starting now on a massive, coordinated research and development effort in nanoelectronics could be nothing less than a loss, in just two decades, of U.S. economic and defense leadership,” said John E. Kelly III, senior vice president and group executive of the IBM Technology Group, speaking at the SIA luncheon Thursday in Redwood City, Calif.
According to Kelly, the United States faces a $1.5 billion shortfall in trying to keep up with the ITRS (International Technology Roadmap for Semiconductors), the measuring stick by which the industry marks its manufacturing progress.
A nanoelectronics research institute, funded by government and private industry, would help get the U.S. chip industry back on track, he said. The South Korean and Japanese governments, among others, already use government-sponsored programs to fund basic semiconductor research.
While U.S. agencies such as DARPA (Defense Advanced Research Projects Agency) also fund basic research, the resulting applications tend to be used by the U.S. military.