Chipmakers Struggle To See Future Rebound Seems Elusive Industry group expects slight 2002 sales gain, then a 20% rise this year.(A)

Byline: JAMES DETAR

As the semiconductor industry closes the books on 2002, it expects to report a small sales gain. That's nothing to cheer about perhaps, but it beats 2001, when the industry had its worst downturn ever.

Chip officials foresee relatively modest growth in 2003 and more of the same in 2004. The outlook is still murky, though, as the industry struggles to gain momentum.

"It's hard to see trends in a downturn," said Mark Templeton, chief executive of Artisan Components Inc., which makes custom circuits that it licenses to chipmakers.

Semiconductor Industry Association President George Scalise says chip sales were up in 2002 -- but not by much. "Semiconductor sales growth in 2002 will be 1.8% over 2001," he said. "Then we look for sequential growth of nearly 20% in 2003 and more than 20% in 2004. We see the industry strengthening as we go through 2003."

That 20% growth figure may sound good, but the industry is crawling out of a deep hole, Scalise says. Chip sales plunged 32% in 2001, from $205 billion to $139 billion. So even with 20% growth in 2003, the industry still won't be back where it was in 2000.

Chipmakers suffered through a perfect storm, analysts say. A glut of chips in 2001 combined with an overall economic recession to cut sales and profits. Then 9-11 further drove sales into the ground. That carried into 2002.