If the Housing Market Collapses, Will it Cause a Recession in the Semiconductor Industry?

Saratoga, California – June 28, 2005 – Will a collapse of the worldwide housing market cause another recession for the semiconductor industry? Not necessarily, says Advanced Forecasting, a Silicon Valley quantitative forecasting house. “First, there is no proven causality between the worldwide housing industry and the semiconductor industry,” states Rosa Luis, Director of Marketing and Sales for Advanced Forecasting, referring to the 2000-2001 relationship between the two industries. “Therefore, a potential collapse in housing prices may or may not cause a decline in the semiconductor business.”

Secondly, she suggested that there exists a set of economic factors that together, and especially through the interaction among them, causes the volatile turning-points in the silicon cycle.

“The two main causes of the 2001 semiconductor recession were the buildup of semiconductor manufacturing overcapacity, partially motivated by the exaggerated exuberance of the dot.com segment, and the prevalent inaccurate forecasts that were based on extrapolations,” elaborated Luis. “While semiconductors collapsed in 2001, the housing market remained relatively healthy throughout the year,” For example, in 2000-2001 U.S. housing prices remained steady. In the U.K., housing prices continued to increase throughout 2001, in contrast to the near vertical decline of the semiconductor industry.

“Finding a leading indicator for an industry or market requires that the correlation between the two be consistent historically,” said Luis. “People tend to look for signals or reasons for the recessions or booms, many times misjudging a coincidental variable as a leading indicator.” This problem is one of the topics to be covered in an upcoming semiconductor forecasting seminar.

Advanced Forecasting specializes in analyzing industry and product line data to find true leading indicators, and shares its expertise with the attendees of its annual semiconductor forecast seminar, held on Monday, July 11, during Semicon West 2005 in San Francisco, CA. The forecasting firm, which does not use a survey-based methodology, will teach participants how to identify and predict the peaks and valleys in a company’s products/divisions’ sales and apply reliable leading indicators to forecast their business. They will also share their forecasts of 2005 for IC Revenues, Equipment, Wafer Sales, and Materials and Components during the seminar. For information on this seminar please visit: http://www.adv-forecast.com/Forecast%20Seminar.htm

Founded in 1987, Advanced Forecasting is a leader in forecasting demand for semiconductors, semiconductor equipment, and materials industries. Its unique features are using purely quantitative input and never retroactively modifying its forecasts. Advanced Forecasting provides the industry’s most accurate forecasts and has acquired a user base of more than 400 companies worldwide.

Contact:

Rosa Luis

Director of Marketing and Sales

Advanced Forecasting

rosal@adv-forecast.com

Toll Free: 1.888.658.3227

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