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Quandary For Semiconductor Industry: Enjoy Today Or Worry About Tomorrow?; Chip and equipment sales are booming, but forecasts see slowdowns in '05, '06.(A)

Investor's Business Daily

| June 03, 2004 | COPYRIGHT 2004 Investor's Business Daily, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan.  All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)Copyright

Byline: JAMES DETAR

A new, impending chip slowdown is now official.

It might seem like chip sales had just started to rebound after the dot-bomb of 2001-02, but analysts have been saying the latest semiconductor cycle was peaking. This week, the industry's leading research group made it official.

The World Semiconductor Trade Statistics group said it expects chip sales to rise 28% this year to a record $213 billion. That would beat the 2000 bubble year by about $9 billion. That's the good news.

The bad news? WSTS says sales will start to slow in the second half of this year, and will rise a mere 8.5% in 2005. Already this week analysts have downgraded some chip gear stocks.

"But there are still some innings to be played" in this up cycle, said WSTS Americas representative Ken Davis, who's also an economist for Motorola's Freescale Semiconductor unit.

Still, chipmakers once again will have to start curbing their spending to match slowing sales growth, which would hurt chip equipment makers.

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