Worldwide semiconductor market to plunge 9% in 1996

A tough year for semiconductor makers will see total revenue fall by US$14 billion.

The worldwide semiconductor market is headed downhill, which will result in a total 1996 revenues of US$137 billion, a 9% drop over last year's $151 billion, research by Dataquest has found. The semiconductor industry has faced a tough year and most analysts and industry observers are well aware that the market has been steadily declining. However, the findings are worse than analysts had expected.

In mid-1996, Dataquest predicted that the semiconductor market would grow 7.6%, a huge decline over 1995 when growth soared 37%. However, the severity of the slowdown during the past six months has caused Dataquest analysts to lower their prediction to a negative 9% growth rate, says Gary Grandbois, vice-president and chief analyst in Dataquest's semiconductors worldwide programme.

The major causes of the market decline include excess inventories, excess capacity, a DRAM price collapse and a weakening yen, Grandbois says. While semiconductor manufacturers in Europe, North and South America, the Middle East, Africa and Asia will all suffer from a major slowdown in sales, Japan will see the largest decline this year, according to the study. This is due to the declining yen-to-dollar exchange rate, Grandbois says.

There is a light at the end of the tunnel for semiconductor manufacturers, however. Dataquest predicts that revenues will begin to climb back up again in 1997 when the end-equipment markets become more solid and the memory price slide stops. "We expect 1997 to be a growth year for the industry," Grandbois says in a company statement.

In 1997, total revenue will reach US$154 billion and will grow steadily through the year 2000, when it will reach US$290 billion, according to the study.

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