The Good News

By Author: Alyry
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The good news is that after last year's precipitous decline, worldwide demand for microchips is rising again. The not-so-good news is that the recovery is likely to be more muted than the industry had hoped. In fact, it could be years before the market makes up fully for 2001's record fall of 32% in chip sales. The latest figures from World Semiconductor Trade Statistics , an industry body , suggest that demand will creep up Breitling Replica this year by 2.3% (to $ 142 billion) and by a healthier 16.6% or so in 2003 . So it could still be 2004 or beyond before the market for chips regains its former heights.

Why is the recovery so weak? The main reason is that sales of personal computers (PCs), which run on such chips and which dominate the market for them, are still struggling to recover from last year's collapse in demand. Gartner Dataquest, a research firm, says worldwide sales of PCs rose by 5.8% year-on-year in the three months to the end of September. Don't be misled: although this is a welcome return to growth, the increase recovers barely half ...
... the ground lost last year when the market for new PCs slumped after the bursting of the technology bubble; the September llth terrorist attacks further depressed the market.

The uncertain outlook for the world economy is encouraging companies to postpone their spending on information technology (IT). In better times, companies would usually begin to replace outdated equipment during the third quarter. This time around, says Gartner Dataquest, the IT industry will probably have to wail until the middle of next year to see any real improvement in sales . Slowest to recover are likely to be sales in Latin America and Japan, where shipments of new PCs actually fell during the third quarter of this year.

Dan Niles of Lehman Brothers, an investment bank, is optimistic that, beginning next year, overall spending on FT will recover. He believes corporate expenditure in the United States is "slowly beginning to stabilise and to pick up" . He predicts single-digit growth in America, followed by an improvement elsewhere later in the year. A noted pessimist for the past two years or so, Mr. Niles points to the declining level o inventories as a sign that the market is close to a recovery. Stocks of PCs and electronics goods have fallen every month, year-on-year, for the past 12 months, he says.
A recovery in demand cannot come too soon for some. Chartered Semiconductor, one of the world's largest producers of custom-made chips, said recently that it plans to cut its workforce in Singapore by 7 %. Reporting its seventh consecutive quarterly loss, the company said it expected sales to fall again during the current period. Taiwan Semiconductor Manufacturing, one of Chartered's main rivals, is also expecting a tough end to the year.

The gloom is not shared by all. Intel, the world's biggest chip producer, saw its share of total sales rise significantly during the third quartet—to 87 % of the worldwide market, the highest it has been for four years. Intel's gain came mainly at Tag Heuer Carrera Replica the expense of Advanced Micro Devices (AMD) , an American rival. Like others in the industry, AMD has suffered from falling orders as customers used up the excess stocks of chips overhanging the market. Worse, the soft market has also forced down the prices of its chips, squeezing its profit margins.