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2001: A Record-setting Year for Semiconductors and Electronics

Scottsdale, Arizona — August 14, 2001 — IC Insights’ soon-to-be-released McClean Report Mid-Year Update describes in detail how 2001 will long be remembered as a record-setting year for the electronics and semiconductor industries. Unfortunately, all of the records will be negative ones. Shown below are the top ten expected highlights (or should we say "lowlights"?) of 2001.

1) Worldwide GDP growth in 2001 is forecast to be only 2.4 percent, a mild global recession. A global recession in 2001 constitutes the shortest interval (3 years) between worldwide recessions in the last 30 years. Since 1970, previous global recessions have typically been 7-9 years apart.

2) For the first time on record, worldwide electronic system sales are forecast to decline (-4 percent) in 2001. The previous record low-growth year for worldwide electronic system sales was in 1998 (+1 percent).

3) In 2001, the worldwide semiconductor market is forecast to register its largest decline in history, -26 percent. This drop far outpaces the -17 percent semiconductor market decline displayed in 1985, the previous worst year.

4) In 2001, integrated circuit (IC) unit volume shipments are forecast to tie the record set in 1985 for the largest decline ever (-16 percent).

5) The "Perfect Storm" combination of global recession, overcapacity, and inventory burn is forecast to cause the current IC industry cycle (i.e., 1999-2001) average annual growth rate to fall to only 9 percent. This is an unprecedented drop from the 16 percent average annual growth rate displayed in the IC industry’s previous cycle in 1993-1998.

6) The Americas’ semiconductor market is forecast to register its worst decline in history in 2001 (-39 percent). The previous record drop was in 1985 (-30 percent).

7) For the first time ever, the ROW (rest-of-world) region in 2001 is forecast to be the largest semiconductor market in the world, displacing the Americas region from the number one ranking. The ROW semiconductor market’s number one ranking in 2001 will be primarily due to the strength of the Chinese market. In fact, China is the only major country in the world forecast to show positive semiconductor market growth (5 percent) in 2001.

8) Semiconductor industry capital spending is expected to show a record 30 percent decline in 2001. This will surpass the previous record decline of 25 percent posted in 1998.

9) The DRAM industry is forecast to show its second-largest decline ever (-53 percent). Only 1985’s 56 percent decline was worse. The 2001 DRAM market ($13.5 billion) is forecast to be only about one-third the size registered six years earlier in 1995 ($41 billion).

10) The 2001 IC foundry market (led by TSMC, UMC, and Chartered) is forecast to show its steepest decline ever (-32 percent). Capacity utilization of the foundries is expected to average an all-time low only 54 percent in 2001, down from 97 percent in 2000.

IC Insights is a firm proponent of industry cycle models. Just as bust (2001) follows boom (2000) and vice versa, semiconductor and electronics industry recoveries in 2002 are, in IC Insights’ opinion, the next stage of the current cycle. IC Insights’ 2002 forecast for worldwide electronics and semiconductor industry growth is 5 and 14 percent, respectively.

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 1997, IC Insights offers coverage of global economic trends, IC market forecasts, 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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