6 PERCENT GROWTH FOR GLOBAL SEMICONDUCTOR SALES Revised forecast now projects record sales of $226 billion for 2005

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The Semiconductor Industry Association (SIA): Pprojecting that worldwide sales of semiconductors will grow by 6 percent in 2005 to a record $226 billion. The SIA November forecast had projected that 2005 sales would be essentially flat with the $213 billion sales level of 2004. The new forecast also projects a compound annual growth rate (CAGR) of 9.8 percent through 2008. The SIA now projects that global chip sales will reach $309 billion in 2008. Worldwide sales of semiconductors have been stronger than expected through the first quarter of 2005. Higher sales have been driven by better than expected demand in a number of important end markets, including personal computers and wireless handsets. Our cautious forecast issued in November of 2004 was based on concerns that high energy prices and lingering excess inventories in a few segments of the industry would dampen sales in 2005. Those fears have not materialized, and economic growth – especially in the United States – has remained strong. Consumer spending on electronic products showed strong growth in 2004). Despite the effects of higher energy prices on discretionary spending by consumers, purchases of consumer electronics devices increased by 11 percent last year to approximately $1,250 per household. A further 11 percent increase in consumer spending on electronics in 2005. The industry responded very quickly to reports of excess semiconductor inventories in the supply chain in the third quarter of 2004. “Inventory and capacity issues have historically been the principal factors contributing to semiconductor industry cycles,” said Scalise. “At the end of 2000, there was $15 billion worth of excess inventory in the supply chain – the equivalent of one month’s revenues for the worldwide industry at the time. It took until 2003 to work off this inventory. In 2004, semiconductor producers and their customers responded quickly to rationalize supply and demand, with the result that excess inventories never got above $1.5 billion. By the end of the first quarter of this year excess inventories had been largely worked off and are no longer a factor in our outlook.

Key drivers of semiconductor growth in 2005 are forecasted to be cellular telephones, personal computers, digital televisions, and digital cameras. Fourth quarter sales of cell phones were much stronger than anticipated.. We now expect that cell phone sales in 2005 will grow by 13 percent off a substantially larger base number. Our forecast for personal computer sales growth is unchanged at 10 percent, but unit sales in 2004 were 3 million above our earlier forecast. We have increased our growth forecast for digital TV sales from 50 percent to 65 percent, and for digital cameras from 6 percent to 15 percent. The robust long-term outlook for chip sales reflects the growing pervasiveness of semiconductors in a very broad range of products.

Future Growth The current forecast projects sales of $226 billion in 2005, $246 billion in 2006, $273 billion in 2007, and $309 billion in 2008. Regional Markets :The forecast projects growth in all regional markets. The Asia-Pacific region will continue to be the fastest-growing market and is projected to reach 46 percent of the worldwide market in 2008. Capacity Utilization Factory utilization has declined steadily over the past three quarters. Overall capacity utilization in the first quarter of 2005 was around 85 percent, down by 1 percent from the fourth quarter of 2004. Utilization of leading-edge capacity (defined as capable of producing 0.16-micron and smaller geometries) increased to 94 percent in the first quarter, an increase of 1 percent from the prior quarter. Capacity utilization by integrated device manufacturers remained stable at 87 percent, while foundry utilization continued to decline to 72 percent of capacity in the first quarter from 78 percent in the prior quarter. Recent projections from the two leading foundry companies project an increase in capacity utilization in the third quarter of 2005. Semiconductor Product Categories Discrete products are projected to grow by 0.5 percent to $15.8 billion in 2005 and to $19.8 billion in 2008, a CAGR of 5.8 percent. Discrete components include power transistors and radio frequency (RF) transistors that are found in wireless consumer products. Optoelectronics device sales are projected to grow by 13.5 percent to $15.6 billion in 2005 and to $22.6 billion in 2008, a CAGR of 13.3 percent. Optoelectronics devices include image-sensors that are used in camera phone and digital still camera applications. Sales of analog devices are expected to be flat in 2005 at the level of 2004, or $31.4 billion. This segment is projected to grow to $43.8 billion by 2008, a CAGR of 8.7 percent. Analog devices are used in communications, computer, consumer, automotive, and industrial applications. Microprocessor sales are projected to grow by 11 percent to $33.9 billion in 2005 and to $44.5 billion in 2008, a CAGR of 9.9 percent. Microprocessors are the engines of personal computers and are used in embedded control applications. Microcontroller sales are projected to grow by 11.0 percent to $13.8 billion in 2005 and to $20 billion in 2008, a CAGR of 12.6 percent. Microcontrollers are used in a wide variety of end-use applications, including automotive and process control systems. DSP sales are projected to grow by 6 percent to $8.3 billion in 2005 and to $13.8 billion in 2008, a CAGR of 13.1 percent. Digital signal processors are the engines of wireless communication devices. MOS logic device sales are projected to grow by 17.7 percent to $58.3 billion in 2005 and to $80.9 billion in 2008, a CAGR of 13.1 percent. MOS logic includes standard logic, standard cell, field programmable logic devices, and a broad range of application-specific products. DRAM sales are projected to decline by 13.5 percent to $23.2 billion in 2005 before growing to $30.4 billion in 2008. The projected CAGR for the forecast period is 3.0 percent. The major application for DRAMs is in personal computers. DRAMs are also increasingly used in handsets. Flash memory sales are projected to grow by 7.6 percent to $18.4 billion in 2005 and to $22.3 billion in 2008, a CAGR of 9.3 percent. Flash memory devices are used in cell phones, digital still cameras, and a broad range of other applications.

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