SIA drops 2003 forecast

Association president is bullish on Semiconductor industry’s near term future but drops forecast all the sameDuring a conference call with SBN on the Semiconductor Industry Association’s March statistics, George Scalise, the organization’s president, gave a bullish talk to brokerage analysts and journalists but still ended up in revising down the forecast for chip market growth in 2003."Our forecast was 19% but due to geopolitical impact we see 10 to 15% now," said Scalise. He also predicted that SARS would have little or no impact on the chip-market recovery.Scalise’s message was that February was a month of stagnation ahead of action in Iraq but that the industry had snapped back strongly in March. He spoke of leading-edge capacity being at 95% utilization and an indicator of better times to come for chip makers. With the release of its March figures the SIA had shown the first quarter 2003 figure up 13% on the first quarter of 2002."We believe the second quarter is going to be strong with quarter-on-quarter sequential growth of 3.5% to 5.5%," Scalise said. He argued that the industry is already 15 months into a recovery which paused in February before bouncing back in March, led by microprocessors, DSP, flash memory and optoelectronics.However some analysts challenged the bullish view saying that with average selling prices for PC equipment and mobile phones dropping, it was hard to see how average chip prices could rise without squeezing margin for equipment vendors. Another analyst asked whether the March rebound might not represent chips entering inventory if, as some people believe, there is no fundamental demand for end-user equipment."We saw no build up in inventory ahead of the geopolitical uncertainty or SARS. We see it [inventory] trending down," said Scalise.Quizzed about the potential impact from the SARS outbreak, Scalise commented "We don’t believe there’s any reason for market impact or supply chain impact from SARS. The World Health Organization is now saying that—with the exception of China—Hong Kong, Singapore, Vietnam, Malaysia and Canada are getting this under control. We’ve seen no disruption to transport, no disruption in supply chain. We don’t believe there will be any going forward," he said.Scalise said the SIA has not yet adjusted its 2004 and 2005 forecasts in the light of the adjusted 2003 forecast, but would announce future-year figures with the mid-year forecast in June.