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Ten Reasons Why IC Insights is Optimistic About the 2H99 IC Market

Scottsdale, Arizona -- September 13, 1999 -- The following are ten reasons why IC Insights is optimistic about the IC industry for the remainder of 1999 and in 2000.

  • Morgan Stanley increased its Korean GDP forecast for 1999 to 8.6% from 4.8%. The Asia-Pacific region recovery appears to have begun.

  • Dell Computer stated that following a recent survey by the company of its major business computer buyers, it does not expect a fourth-quarter cutback on PC purchases. There appears to be diminishing concern over the possibility of severe computer purchase cutbacks in advance of Y2K.

  • U.S. Department of Commerce data showed that July's U.S. computer bookings (in dollars) surged 19% compared to June. This was one of the biggest one-month increases on record!

  • NEC Electronics announced that it would begin to build up additional IC inventory to guard against supply disruptions from Y2K effects. This could signal the start of a significant IC inventory build by electronic system suppliers.

  • Flash memory maker SST announced that it expects very strong 4Q99 financials based upon its customers telling it they plan to build Y2K "buffer inventory." Another sign of Y2K "IC inventory mania" building.

  • After a slow 2Q99 IC market, July results were very strong (e.g., the July 99/July 98 flash memory market increased 100%). IC Insights believes that the 3Q/2Q 1999 IC market could show a 10% increase. If this occurs, it would be the largest 3Q/2Q IC market increase in the 1990's!

  • July's worldwide IC market, expressed in U.S. dollars, used a 119¥ per dollar exchange rate for the Japanese market. The average yen per dollar exchange rate in August was 113 and on September 13, it slid to 106. Expect an August and September surge in the Japanese IC market to occur as these exchange rate fluctuations begin to impact the market figures as reported in U.S. dollars.

  • As mentioned in IC Insights' previous McClean Report updates, 2Q99 was labeled the "marketshare quarter" for the MPU and DRAM suppliers. It is interesting to note that MPU average selling price (ASP) went from $71.70 in June of 1999 to $89.80 in July of 1999---a one-month ASP increase of 25%! Amazing what decreased competition can do to pricing!

  • The major IC foundries (e.g., TSMC, UMC, etc.) are at 100% capacity utilization for their 0.35µ and finer processes. The FSA's (Fabless Semiconductor Association) most recent company member survey indicated a 50% 1999/1998 increase in wafer demand (up from a 41% increase according to an earlier 1999 survey).

  • Worldwide MOS IC capacity utilization jumped from 85.9% in 1Q99 to 91.5% in 2Q99. MOS IC capacity utilization in 2Q99 for ICs with feature sizes of less than 0.4µ was 95%!

Even after considering the recent events described above, our forecast of 14 percent growth for the 1999 IC market still appears sound. However, we are keeping close watch on the building momentum for IC inventory accumulation as well as for additional IC capacity shortfalls. Under the right circumstances, these two factors alone are enough to trigger the next IC industry "boom" period.

About IC Insights

IC Insights, Inc., based in Scottsdale, Arizona, is dedicated to providing high-quality, cost-effective market research for the integrated circuit industry. Founded in October 1997, IC Insights offers coverage of global economic trends, the IC market forecast, capital spending and fab capacity trends, product market details, and technology trends, as well as complete IC company profiles and evaluations of emerging markets for ICs.

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