Cupertino, California, August 18, 2003 -- The current status of the Integrated Circuits (IC) industry is one of recovery. The worst recession to affect this industry is over and it has entered a growth period back in November 2001. The effects of the "bubble" experienced in 2000 are still being felt today. Difficult lessons must be learned and it is likely that repeating the bubble is unavoidable, according to Advanced Forecasting.

A recovery was predicted for the underlying demand of the IC industry more than a year and a half ago, according to Advanced Forecasting. While the recent 18 months have brought slow improvement, accelerated growth of ICs will begin in the fourth quarter of 2003. Advanced Forecasting's 19-month forecast of underlying demand for ICs converged with actual IC shipments in January 2003, recently establishing an upward shift in direction, laying the groundwork for the upswing Advanced Forecasting had predicted. Supporting the recovery are high fab capacity utilization levels and sales of ICs in units that currently stand at 5% below their all time peak of 7.7 billion units. At the depth of the 2001 recession, IC units declined 33% from their peak; IC revenues dropped 46% from their peak.

Quantitative forecasting firm Advanced Forecasting, warns that a similar catastrophe may reoccur because industry decision makers have not addressed the roots of the problem.

"Advanced Forecasting predicted in early 1999 that the growth rate of underlying demand for ICs would slow significantly in the summer of 2000, warning the industry to slow its exaggerated momentum," said Rosa Luis, Director of Marketing and Sales for Advanced Forecasting. "Instead of slowing down, the momentum continued, leading to inflated targets, over-bookings, overcapacity, and inventories, causing the longest and deepest recession in semiconductor history."

Prevalent forecasts in 2000 predicted strong growth through 2002, propelling an already euphoric industry into collapse. "Our forecasts predicted flat growth in underlying demand for ICs during the same period because the models used are purely quantitative, using no opinion," said Luis. "Those heeding our warnings about the slow down in growth faired much better than those choosing to ignore them."

Whether or not the semiconductor industry has learned from the mistakes made during the bubble of 2000 remains to be seen. The time to test lessons learned from 2000 is when the growth rate of underlying demand for ICs is predicted to slow down after a period of steady growth.

The likelihood of the bubble reoccurring will be high if those forecasting demand and growth do not learn from the mistakes of 2000. Inaccurate forecasts are generated through extrapolations, a highly risky exercise. Academic research shows that it is human nature to extrapolate, taking the status of the current situation and projecting it in to the future. The forecasts resulting from extrapolations oftentimes miss the turning point in industry direction. Therefore only an objective, quantitative forecasting tool will accurately predict industry turning points.

"While Advanced Forecasting predicts continued growth for the near term, at some point underlying demand will begin to slow down," said Luis. "At that time we'll be able to determine if the industry will obey its dictates and slow with it. If not, over-heating will occur and another recession will follow."

Advanced Forecasting offers quantitative forecasts of all ICs, semiconductor equipment (Front-End and Back-End), disk drives, PCBs, Fab Capacity Utilization, Wafer Shipments, and DRAM ASPs. Forecast rolling horizons extend up to 19 months. It is the only forecasting firm that has guaranteed its forecasting services with a full refund period since its inception (1986).

Back to Press Releases

Back to Top