News and New Products

Chip Industry Set for Turmoil

By David Manners -- Electronics Weekly, 11/22/2004

A massive semiconductor industry shakeout is on the way as the public companies suffer declining revenues in contrast with the privately held companies, which are growing.

That is according to Future Horizons, which makes the claim in its semiconductor monthly update report for November.

According to the firm, 71 out of 72 publicly quoted semiconductor companies suffered a reduction in their collective revenue in Q3. However, the non-publicly quoted companies grew their collective revenues by 5.2 percent.

"There is clearly a different set of market dynamics at play, favoring the newer, non-public, firms at the expense of the more established incumbents. The stage is being set for a massive industry shakeout, of a magnitude not seen since the '70s and '80s. There will be a lot of blood spilt on the roads lying ahead," said the report.

This consolidation is not the result of slowing growth, said the report. “On the contrary we are convinced that the market growth potential is massive," it claimed.

An early brake was applied to capacity spending and demand is holding up. But Future Horizons sees a major dislocation in the technology, and the fragmentation of markets, as the precipitating factors for the shakeout.

The technology dislocation comes from the twin effects of declining project cycles and declining product lifetimes; the market fragmentation comes as some market segments grow while others decline.

In the equipment market the going will be tough, reckons Future Horizons. This is backed by a recent report from Gartner Dataquest, which estimated that 20 percent to 40 percent of semiconductor production equipment makers will fold.
 
Electronics Weekly is the London-based sister publication of Electronic News.