Worldwide Semiconductor Market Will Continue to Show Gradual Improvement in 2006

Gartner: The worldwide semiconductor market is gradually improving and cautious investment in incremental capacity additions will keep the market in a pattern of modest growth during the next few years. Worldwide semiconductor revenue is forecast to reach $257.7 billion in 2006, a 9.5 percent increase from 2005 revenue of $235.3 billion. In 2005, the market grew 7 percent. A mild slowdown is expected in 2007 with growth of 7 percent, 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. Any lengthening of device lead-times in coming months will be seen as further evidence of a tightening market. 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 utilization rates, increased capital spending will be required to facilitate a rise in output. 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 percent this year. Semiconductor Market Forecast Alert: 1Q06 Update. Publ 20060216