Chip market predicted to slow

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Growth across the global semiconductor industry will slow dramatically next year with the memory chip market especially hard-hit, according to new industry forecasts.

The prediction confirms fears the semiconductor cycle has peaked after three years of strong growth. Anxiety about the downswing has dragged semiconductor stocks sharply lower since the summer.

The Semiconductor Industry Association said it expected chipmakers to achieve worldwide sales of $214bn this year, an increase of 28.5 per cent over 2003 and surpassing the $204bn record achieved in 2000.

However, the SIA revised downward its previous forecasts for 2005. The SIA, which represents the US chip industry, predicted flat sales for 2005, ending three years of robust growth. The association had previously forecast 4.5 per cent growth for 2005.

Continued growth in sectors such as signal processing and optoelectronics will be offset by a 15 per cent decline in sales of D-Ram memory chips, it said.

Semiconductor companies have been revising downwards predictions for fourth-quarter revenues and earnings amid signs of lower demand and excess inventory.

National Semiconductor, the California-based chipmaker, on Monday lowered its revenue forecast to $445-$450m from $493m-$504m. The new estimate represents a sequential decline of 19 per cent.

The semiconductor industry is cyclical and notoriously difficult to forecast. A year ago, the SIA forecast industry-wide growth of 19 per cent for 2004, almost 10 percentage points below the likely outcome.

Some independent analysts believe 2005 will be more painful than the SIA is forecasting.

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