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

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

  • 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

  • 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

  • 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

  • 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.

  • As
    mentioned in IC Insights’ previous McClean
    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%!

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.

IC Insights

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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