War and Chips

The prospect of war with Iraq has lead to a postponement of semiconductor demand but not an absolute decline, according to Doug Andrey, principal analyst of the Semiconductor Industry Association (SIA) speaking at the 2003 Globalpress conference in Monterey.

“After 9/11 we saw demand postponed but it did not disappear,” said Andrey, arguing that the same thing is happening now, and that settlement of the Iraq issue would see a release of pent-up demand.

Market weakness in December, January and February is a mixture of seasonal factors, which always make these poorly performing months for semiconductor demand, compounded by the war issue.

The SIA believes the industry has under-invested in capacity and shortages will arise this year.

Andrey said leading-edge capacity was 90 per cent utilised and therefore only a small increase in demand would tip the balance into under-capacity.

Underlying demand has remained strong through the downturn, said Andrey, with unit demand increasing 14 per cent, though revenues grew only 1 per cent. In analogue, unit demand grew by 34 per cent for revenue growth of only 1.6 per cent.

Andrey said the boost in demand post-Iraq would be led by corporate buying from companies which have put expenditure on hold pending the outcome of the war issue.

“Corporate IT people have the budgets, but they aren’t making the buying decisions,” added Andrey.