After banner year, chip sales seen slack for 2001

By Timna Tanners, InfoWorld |  Business

(REUTERS) -- Semiconductor sales rose 31 percent to a record $222.1 billion in 2000, but that pace will slacken in 2001 due mostly to weaker U.S. demand, technology consulting group Gartner Group's Dataquest Inc. said.

The dampened outlook for semiconductor chips already has taken its toll on fourth quarter sales outlooks and stock prices, but the Gartner report on the worldwide semiconductor market released on Tuesday said some of the reduced sales were merely due to inventory adjustments.

"Historically, the industry has gone through inventory corrections during the positive portion of the industry cycle, and we see no reason to believe that this current weakening is anything else other than an inventory correction," said Joe D'Elia, vice president and director of Gartner Dataquest's European semiconductor research.

Semiconductor sales in 2000 grew to $222.08 billion, a 31 percent rise from 1999. For 2001, the report estimated growth would slow to the low 20 percent range.

"Essentially we believe we are still looking for a pretty strong year in 2001," D'Elia told Reuters.

"You need to look at the semiconductor worldwide consumption. The U.S. now has the weakest demand, mainly because that's where we had the biggest buildup in the fourth quarter. But Japan is going gangbusters with one of its highest consumption levels in years. Demand in Europe and Asia Pacific is still pretty strong," D'Elia said.

COMPANIES BATTLE FOR TOP SPOTS

The report also tracked the performance of top semiconductor makers. D'Elia noted that companies with the strongest estimated growth rates included Toshiba Corp., STMicroelectronics and Hyundai Electronics Industries Co. Ltd.

"There was no one strategy that seems to have paid off. The folks with good growth seemed to go about it in different ways," D'Elia said.

Although Intel Corp. remained the market leader by far, with revenues estimated to be triple that of its closest competitors, its growth rate was the smallest, just 11 percent.

"Intel historically loses market share when the industry is growing. It's a phenomenon because their revenues are so tied to one product -- their microprocessors depend on PC (personal computer) growth," D'Elia said.

In contrast, Toshiba moved up to be the world's second largest semiconductor maker from third on the list, with estimated revenue growth of 47.2 percent in 2000. STMicroelectronics gained market share with growth seen at 56.5 percent in 2000.

Copyright (c) 2000 Reuters Limited. Reuters content is the intellectual property of Reuters Limited. For additional information on other Reuters Services please visit the Reuters public web site - http://www.reuters.com.

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