After more than two years of recession and huge losses, the dynamic random-access memory (DRAM) market is on the verge of recovery. This is welcome news for the long-suffering DRAM vendors, but will put pressure on PC vendors and other DRAM users as prices for critical components increase, according to Gartner, Inc.

"'Stabilizing prices and lower inventories alone do not constitute a recovery in the DRAM industry, but these factors combined, and the positive sentiment in the DRAM industry point to the possibility that the DRAM industry recovery has, at long last, begun,'" Norwood said. "'Recent cuts in planned DRAM supply by major vendors have set the industry up for a possible shortage. If this happens, it will mean a return to profits for vendors and strong revenue growth.'"

Source: "Gartner Says Worldwide DRAM Market is Showing Signs That a Recovery is Under Way," August 19, 2003

"'Noteworthy improvements in market conditions during the last few weeks confirm that the industry is continuing its recovery as expected and is about to enter a more accelerated growth phase. This observation is in line with our long-standing assumption of a three-phase recovery in the market,'" said Richard Gordon, research vice president for Gartner's semiconductor research group. "'While many industry watchers have been revising down their forecasts recently, we have been predicting growth of around 10 percent for 2003 since the fourth quarter of last year. Our forecasting consistency is a testament to our rigorous methodology and comprehensive applications-based forecast database.'"

"'It is becoming increasingly likely that the long-awaited corporate PC replacement cycle will be characterized by incremental increases in IT spending spread over a more prolonged timeframe than we have seen in the past,'" Gordon said. "'While this trend would underpin a sustained semiconductor recovery, it may act to temper headline annual revenue growth. Excess capacity in the telecommunications sector also remains a concern that could postpone the return and inhibit the level of telecommunications industry capital spending in the medium to long term.'"

Source: "Gartner Says Worldwide Semiconductor Industry Is On Track for 11 Percent Growth in 2003," August 18, 2003

Worldwide semiconductor capital spending is forecast to total $29.9 billion in 2003, a 7.9 percent increase from 2002. In 2002, capital spending suffered a 37.9 percent decline. All other segments of the semiconductor capital equipment market are on pace for increased spending in 2003. In 2002, all of these segments suffered revenue declines of at least 21 percent.

"'On a regional basis, Japanese companies are most aggressively raising spending this year with a possible increase of 25 percent to 30 percent over 2002, funding its newly restructured ventures,'" Klaus-Dieter Rinnen, managing vice president for Gartner's semiconductor manufacturing and design research group. "'Dynamic random-access memory (DRAM) has been strong so far, led by Samsung's aggressive plans to increase spending by more than 50 percent over last year. Foundry is the wild card. We expect foundry growth to be flat in 2003, but this can change in the blink of an eye.'"

"'In the second half of 2003, we anticipate utilization rates to rise further,'" Rinnen said. "'Overall utilization should cross the 85 percent mark during the second half of the year. Leading-edge utilization should end the year at a projected 95 percent. The speed at which we approach these respective thresholds and the strength of follow on demand will determine spending in the second half of this year and onward.'"

Source: "Gartner Says Worldwide Semiconductor Capital Equipment Spending to Return to Positive Growth in 2003," July 9, 2003

"'Business models for IP vendors are a topic of much discussion, with a large amount of experimentation taking place,'" said Jim Tully, vice president and research director for Gartner's emerging technologies and semiconductor group. "'Even among the top 10 vendors, there are narrow-focused vendors, broadline players, vendors of commodity products, differentiated product vendors, library suppliers, block vendors and platform/solution providers. Some companies focus only on IP, while others are primarily in a different business.'"

"'Vendors must develop business models that will build royalty revenue for the benefit of vendors and users,'" Tully said. "'But, the royalty percentage should not be allowed to grow over 50 percent as this would expose vendors to the relative volatility of the semiconductor market.'"

"'Value can lie in unique technology, applications expertise, support services or simply making it easy for customers to evaluate, buy and integrate the product. Wherever it lies, value must be at the core of a successful business model,'" Tully said.

Source: "Gartner Says Semiconductor IP Companies Trying to Find the Business Model to Succeed," June 16, 2003

Driven by sales of premium-priced deep ultraviolet (DUV) resist, worldwide semiconductor photoresist sales reached $690.6 million in 2002, a 2.7 percent increase from 2001 revenue of $672.4 million, according to Gartner, Inc.

"'Photoresist sales benefited from a recovery in semiconductor unit demand during 2002. 2003 is expected to be the year of accelerating growth, driven by both strengthening volume demand, as well as an appreciating product mix,'" said Klaus-Dieter Rinnen, managing vice president for Gartner's semiconductor manufacturing and design research group.

I-line resist units continued to be the largest volume runner in the photoresist market, distancing itself further from g-line, but on a revenue basis, I-line resist trails DUV. Gartner analysts said that despite slowing sales, I-line is not going away. "'I-line sales still have life in them and sales started to grow once again in 2002,'" Rinnen said. "'Our estimates show I-line sales accounted for about 36 percent of total photoresist sales in 2002.'"

Source: "Gartner Says Worldwide Semiconductor Photoresist Sales Totaled $691 Million in 2002," June 11, 2003

"'The high-value-added product, 300mm wafer, steadily penetrated the market, but at the cost of its premium price advantage,'" said Takashi Ogawa, principal analyst for Gartner's semiconductor manufacturing research group. "'Despite the decline in prices, the success of vendors in the 300mm wafer business clearly reflects the impact 300mm is having on the industry.'"

Gartner analysts said vendors should expect further consolidation in the industry. In 2002, the merger of Sumitomo Metal Industry and the silicon wafer division of Mitsubishi Materials, created SUMCO, which resulted in the second-largest vendor being much closer to the industry leader, Shin-Etsu.

"'This certainly has sent a shock wave to the peaceful industry landscape, where market share remained stable over the past decade,'" Ogawa said. "'We believe market share will become volatile through the consolidation process, and a major reshuffle will take place in the next three to five years.'"

Source: "Gartner Says Worldwide Silicon Wafer Market Returned to Positive Growth in 2002," May 29, 2003

"'With quarterly sequential growth at about negative 3.5 percent in the first quarter of 2003, but likely to turn mildly positive in the second quarter, it appears that the industry is capable of growing in the high single digits this year,'" said Richard Gordon, research vice president for Gartner's semiconductor research group. "'However, even though some of the geopolitical uncertainty that has been dogging the global macroeconomic environment receded with the end of the war in Iraq, and with the severe acute respiratory syndrome (SARS) outbreak seemingly more under control, indications about the level of demand for semiconductors in the second half of 2003 remain stubbornly elusive.'"

Digital cellular handsets, flat-panel displays and digital video consumer products are expected to have strong growth in 2003. The cellular phone handset application continues to prop up the semiconductor industry, driving above-average device market growth for memories, digital signal processor-based ICs and complementary metal-oxide semiconductor (CMOS) image sensors. Strong growth is also expected in the liquid crystal display (LCD) driver market and in application-specific devices for consumer electronics.

Source: "Gartner Says Worldwide Semiconductor Market to Experience 8 Percent Growth in 2003," May 20, 2003

Intense competition between NAND flash memory suppliers has lowered costs and stimulated consumer adoption of removable solid-state storage. Worldwide removable solid-state storage revenue totaled $2.13 billion in 2002, a 72.9 percent increase from 2001 revenue of $1.23 billion, according to Gartner Inc.

"'The flash card and USB flash drive market is price-point driven, which means that consumers will buy the maximum number of megabytes of storage that their budget will allow, so the market greatly benefited from the reduced costs associated with the adoption of advanced semiconductor device technology,'" said Joseph Unsworth, analyst for Gartner's semiconductor group. "'Competition between the main NAND flash memory device suppliers, Samsung and Toshiba, further accelerated cost per bit declines. The lower costs fueled the continued growth of the flash card market. However, the more explosive growth was in the USB flash drive market as this new application was adopted quickly in the marketplace.'"

Source: "Gartner Says Worldwide Removable Solid-State Storage Market Grew 73 Percent in 2002," May 15, 2003

"'Spending in 2003 will most likely be driven by a reduction of the high degree of uncertainty in the business climate,'" said Jim Hines, principal analyst for Gartner. "'This will allow for calculated business planning and, consequently, allow companies to move away from worst-case preparedness toward calculated risk taking.'"

"'In the second half of 2003, utilization rates are expected to rise, ending the year at a projected 90 percent, up from about 75 percent right now,'" said Dean Freeman, principal analyst for Gartner. "'The speed at which we approach this threshold and the strength of follow on demand will determine spending in the second half of this year and onward.'"

"'The rapid adoption of the lead frame-based leadless packages is of additional significance. These quad flatpack, no leads (QFN), small outline, no leads (SON) and bumpless chip carrier (BCC) variations of chip-scale packages are experiencing the fastest ramp-up rate of any package previously introduced into the industry,'" said Jim Walker, principal analyst for Gartner. "'Wireless and portable products are adopting these as replacements for the larger, more mature small outline integrated circuit family of packages.'"

Source: "Gartner Says Semiconductor Capital Equipment Spending Outlook Remains Positive in 2003," April 14, 2003

"'The dire outcome of 2002 was the result of slower-than-anticipated end-user demand and an increasing level of macroeconomic uncertainty that hit semiconductor vendors rapidly in the second half of 2002,'" said Klaus-Dieter Rinnen, vice president for Gartner's semiconductor research group. "'Consequently, spending plans were adjusted downward, projects were delayed or shelved, and equipment orders were either pushed out or cancelled.'"

"'Some small emerging technologies such as atomic layer deposition (ALD), which grew 53.2 percent, and silicon germanium epitaxy, which increased 55 percent, grew above the marketplace as these new technologies are beginning to emerge from R&D and move into production,'s" Rinnen said.

Source: "Gartner Says Worldwide Semiconductor Manufacturing Equipment Sales Suffered Second Year of Steep Decline in 2002," April 8, 2003

The worldwide wafer fab equipment market showed signs of improvement early in 2002, but those early hopes never materialized, according to Gartner, Inc. Worldwide wafer fab equipment revenue in 2002 totaled $16.5 billion, a 31.6 percent decline from 2001 revenue of $24.1 billion.

"'All major segments were affected by the industry decline in 2002. Typically, in a slow year, there are a few segments that give the industry a bit of a boost,'" said Dean Freeman, principal analyst for Gartner's semiconductor research group. "'In 2002, some emerging technologies, such as silicon germanium epitaxy and atomic layer deposition, demonstrated growth and a few of the technology segments associated with copper dual damascene grew, but as a whole, all segments failed to inspire the industry.'"

"'After two years of back-breaking declines, the industry is looking for some positive news. Hopefully, tight capacity at 180 nm and below, coupled with the under investment in 2002 will provide the foundation for a more positive 2003,'" said Freeman.

Source: "Gartner Says Worldwide Wafer Fab Equipment Market Declined 32 Percent in 2002," April 7, 2003

"'There are early signs that the long-awaited corporate PC replacement cycle may indeed be about to begin, but it is too early to say that significantly increased semiconductor sales to this sector are guaranteed,'" said Richard Gordon, principal analyst for Gartner Dataquest's semiconductor research group. "'There remains doubt about the business imperative that dictates upgraded PCs are required to improve business productivity, so we will likely have to wait until the third quarter of 2003 before we can gauge the strength of capital spending on IT.'"

Looking longer term, Gartner Dataquest analysts said a combination of pent-up demand and under-investment in fab capacity is likely to act to spur semiconductor unit shipment growth and to stabilize device pricing making prospects for strong growth in 2004 and 2005.

Source: "Gartner Dataquest Says Semiconductor Industry Will Need to Wait Until Second Half of 2003 to See Stronger Growth," February 24, 2003

"'Spending will be driven by a continued need for advanced technology to keep innovation going and manufacturing costs down, and a renewed need for more capacity,'" said Klaus Rinnen, chief analyst and director of Gartner Dataquest's semiconductor manufacturing group. "'Fab utilization worldwide has been improving since the end of 2001. Leading-edge capacity exceeded 90 percent periodically during 2002 and future improvements in end-user demand will map quickly into further capacity needs.'"

"'Many of the new designs from fabless semiconductor companies and IDMs will go into production of these technologies during 2003. As demand increases, foundries will expand capacity in an attempt to stay ahead, while at the same time, avoid overspending and driving down utilization to unprofitable levels,'" said Rinnen. "'Because the foundries are sitting on unfilled fabs, and equipment lead times are relatively short, capacity can be increased very quickly when demand growth resumes.'"

"'While there is an absence of a driving killer application and a catalyst to incite an end-user spending spree, the temporal expanse of depressed spending is creating pent-up demand,'" said Rinnen. "'Spending will be more at corporations' discretion, but there are competitive elements that could exert pressure on corporations once the wave starts.'"

Source: "Gartner Dataquest Says Semiconductor Capital Spending and Wafer Fab Equipment Spending Return to Positive Growth in 2003," December 19, 2002

The worldwide semiconductor packaging and assembly segment of the industry is poised for growth in 2003, according to Dataquest Inc., a unit of Gartner, Inc. After declining more than 26 percent to $24.8 billion in value in 2001, the total semiconductor packaging and assembly marketplace rebounded 7 percent in 2002 with revenue of $26.7 billion. The market is poised for 10.5 percent growth in 2003, with revenue of $ 29.6 billion.

The SATS industry experienced three straight months of increases from July through October in 2002, but then it suffered slower sales in November. "'These cyclic adjustments to the market will most likely continue into the first and possibly second quarter of 2003, as consistent long-term demand has yet to materialize,'" said Jim Walker, principal analyst for Gartner Dataquest's semiconductor research group.

"'The shift to array and leading-edge packaging is growing while continuing to be more sophisticated and complex. Many IDM's and OEM's desire to conserve their capital and are now actively seeking to outsource more of their packaging requirements,'" Walker said. "'As the transition to these new packages has occurred more in recent months, the result is the return to growth and profitability in the outsourcing market.'"

Source: "Gartner Dataquest Says Semiconductor Packaging and Assembly Market to Experience Double-Digit Growth in 2003," December 19, 2002

Silicon wafer demand will begin a major expansion between the second half of 2003 and 2004, as it will be driven by a combination of a recovery of device demand and the startup of 300mm fabs, according to Dataquest Inc., a unit of Gartner, Inc.

Gartner Dataquest analysts said there will be some delays in 300mm fab projects because of feared cutbacks of capital spending by semiconductor vendors. However, there will be increased demand in the second half of 2002.

"'At present, 300mm wafer demand is estimated at approximately 200,000 of wafers per month. It will grow rapidly with the reinvigoration of 300mm fab projects and is expected to reach a level of 440,000-450,000 of wafers per month in the fourth quarter of 2003,'" said Takashi Ogawa, principal analyst for Gartner Dataquest's semiconductor manufacturing research group. "'Coupled with the 300mm wafer demand ramp-up, total silicon demand will expand appreciably at the annualized pace of 23 percent in 2004 and will reach 6,147MSI.'"

Source: "Gartner Dataquest Forecasts Increased Demand for Silicon Wafer Market in 2003," December 19, 2002

Worldwide dynamic random access memory (DRAM) revenue reached $16.2 billion in 2002, a 36.7 percent increase from 2001, according to preliminary statistic released by Dataquest Inc., a unit of Gartner, Inc.

"'Samsung had an exceptional year, and contrary to its rivals, it managed to make a profit throughout the year,'" said Andrew Norwood, senior analyst with Gartner Dataquest. "Samsung's revenue was strengthened by its high exposure to premium price products, such as Rambus DRAM (RDRAM) and Double Data Rate static RAM (DDR SRAM)."

Hynix Semiconductor's revenue increased 23 percent in 2002, but its market share declined from 2001 results. "Hynix has been losing share in some of the big accounts, and its low percentage of premium products has kept revenue growth below the overall industry average,'" Norwood said.

DRAM remains the most volatile sector of the worldwide semiconductor market. Worldwide semiconductor revenue grew 1.4 percent in 2002. If DRAM revenue were excluded from the total semiconductor market, worldwide semiconductor sales revenue would have decline by 2 percent.

Source: " Gartner Dataquest Says Worldwide DRAM Industry Grows 37 Percent in 2002, According to Preliminary Results," December 17, 2002

The worldwide semiconductor industry returned to positive growth in 2002, with revenue totaling $155.4 billion in 2002, a 1.4 percent increase from 2001, according to preliminary statistics by Dataquest Inc., a unit of Gartner, Inc. In 2001, worldwide semiconductor revenue declined 32 percent.

"'Weak end markets continue to depress the semiconductor industry, leaving scant opportunities for growth,'" said Richard Gordon, principal analyst for Gartner Dataquest's worldwide semiconductor group. "'However, some vendors with a particular product or applications focus did manage to impress in 2002; the most notable of these is Samsung, which is now second only to Intel in total semiconductor sales worldwide.'"

Gartner analysts said during industry downtimes such as these, only those vendors with solid strategies and business focus can hope to survive and to be able to invest in next-generation technology and capacity. Sales performance in 2002 will provide guidance about which vendors are likely to be the leaders during the next semiconductor industry cycle.

Source: "Gartner Dataquest Preliminary Statistics Show Memory Segment Leads Semiconductor Market to Slight Increase in 2002," December 13, 2002

"The worldwide semiconductor packaging and assembly equipment market is showing signs of a recovery, although the industry will not return to positive revenue growth until 2003, according to Dataquest Inc., a unit of Gartner, Inc."

"In 2001, worldwide semiconductor packaging and assembly equipment revenue totaled $2.981 billion, a 56 percent decline from 2000. In 2002, the market will continue to slide, but not as badly as the previous year. For 2002, equipment revenue is projected to reach $2.715 billion, a 9 percent decline from 2001. Gartner Dataquest analyst said the industry will rebound in 2003 with revenue of $4.191 billion, a 54 percent increase from 2002."

"'In the second half of 2002, the demand for power and discrete packaging will grow,' said Jim Walker, principal analyst for Gartner Dataquest's semiconductor research group. 'Portable devices are still growing and power management is a key issue. Packages must be developed and manufactured to meet this ongoing market demand and challenge.'"

"Consolidation of semiconductor assembly and test service (SATS) companies will continue throughout 2002 and into 2003. Excess capacity and lack of available capital will make it difficult for second- and third-tier SATS companies to survive."

Source: "Gartner Dataquest Says Semiconductor Packaging and Assembly Equipment Market to Begin Upturn in 2003," July 11, 2002