Meg Villeneuve

SAN JOSE, CA—The semiconductor industry experienced the worst decline in its history during 2001, according to a new report issued by Gartner Dataquest.

“As demand weakened and capacity utilization decreased, financial considerations became foremost in everyone's mind. Thus capital expenditures took a back seat to everyday production needs,” notes Klaus Rinnen, chief analyst and director of Gartner Dataquest's semiconductor manufacturing group.

Worldwide semiconductor capital spending totaled some $44.4 billion in 2001, a 29 percent decrease over 2000. Semiconductor equipment spending also dropped to $25.2 billion in 2001, from $39.9 billion in 2000, according to the market researcher.

So what does this mean for 2002? Gartner predicts that 2002 will be a transitional year for the semiconductor industry and says the industry may see signs of recovery during the second half of the year.

“A macroeconomic recovery and returning electronic equipment demand should finally bring the demand component of the down cycle under control. However, overcapacity remains excessive and still demands industry attention. With demand firming, the semiconductor industry will be afforded increasing visibility, finally being able to plot its course to another up cycle,” Rinnen adds.

Separately, the Semiconductor Industry Association (SIA) says worldwide sales of semiconductors rose, for the second month in a row. Sales in November reached $10.60 billion, an increase of 1.6 percent over October's figure of $10.44 billion.

“Our forecast released in November calls fourth quarter sales to be 4.7% higher than the third quarter and with two months of data now in, we are on target to meet that projection,” notes George Scalise, SIA president. “Personal computers, wireless communications, consumer products and automotive continue to fuel semiconductor sales and lead the industry out of its year-long recession,” he adds.

Compared to October, November sales in the European region increased the most at 5.3 percent, while the Asian Pacific market grew 2.5 percent. Sales in the Americas remained flat and sales in Japan were down one percent.