Industry to Grow: Ernst & &nYoung Survey

Staff -- Semiconductor International, 6/1/1999

Semiconductor industry executives are becoming increasingly optimistic about industry growth over the next two years, according to a survey released by professional services firm Ernst & Young LLP (San Jose, Calif.). The survey found that the vast majority (84%) of respondents expect the industry to return to its historically high growth rate within two years, while nearly half (49%) expect the market to bounce back in the next 12 months.

"The survey shows that the semiconductor industry is on the rebound, a confirmation of what we have been expecting for next year," said Stephen E. Almassy, national director of Ernst & Young's Technology, Communication & Entertainment practice. "The study also sheds light on the key issues on the minds of industry executives, points to growth trends within the industry and identifies key markets that will benefit from this growth."

While the more than 300 senior-level semiconductor industry executives (vice presidents and above) who took part in the study cite different reasons for anticipated growth, 42% agree that technological innovation will provide the most significant competitive advantage for companies in the industry, while partnerships (22%) and being first to market (19%) were the next most commonly cited factors. Virtually all (98%) believe there will be a demand for increased processing speed in the next five years.

According to 38% of respondents, telecommunications infrastructure is expected to be a key impetus for semiconductor industry expansion over the next five years. Just 17% of respondents said that either consumer and information appliances (such as DVD and digital phones) or industrial applications would represent the key drivers of future growth for the semiconductor industry.

In addition, 86% of the executives surveyed see industry consolidation increasing over the next five years, with more than four-in-ten expecting the consolidation to be significant. "The marketplace is ripe for consolidation as companies seek innovative ways to participate in future high growth segments of the market and improve profitability," said Patrick Hyek, a Semiconductor Industry Services Partner at Ernst & Young. "The winners will be those companies that set themselves apart through product innovation, but that can also leverage strategic partnerships and supply chain management to get ahead."