Electronics Industry Update

Worldwide Sales of Semiconductor Devices Historical Data: World Semiconductor Trade Statistics (WSTS) Forecast: Semiconductor International	Production Trends and Forecasts - Electronic Components Historical Data: Federal Reserve Board Forecast: Semiconductor International
Production Trends and Forecasts - Computers Historical Data: Federal Reserve Board Forecast: Semiconductor International	Production Trends and Forecasts - Consumer Electronics Historical Data: Federal Reserve Board Forecast: Semiconductor International

Long-term trends in the long-depressed semiconductor market continue to improve. The total value of semiconductors sold during January of this year was 7.1% above the January 1998 level - the strongest over-the-year sales increase recorded since September 1997. The 'story behind the story' in the chip market's improving sales trends is the fact that prices, after a long and steep period of decline, are showing remarkable improvement. The average selling price of all semiconductors (integrated and discrete combined) was 6.2% higher in January 1999 than in January 1998. Average microprocessor prices were 9.2% higher in January of this year than in January 1998. Although the market has seen some ups and downs in pricing during the past year, average microprocessor prices in five of the past seven months have been above their level of a year earlier. But DRAM prices were a whopping 50.5% higher in January 1999 than during January 1998. As recently as this past September, DRAM prices were still running more than 30% below their year-earlier level.   

U.S. Companies: Outsourcing, Upgrading and Cutting Spending

Key Points:

• Spending by U.S. companies will represent 34% of the worldwide total this year.
• U.S. semiconductor companies' capital spending will decline for the third year in a row and will be 31% below its 1996 peak.
• The fall this year will be steep (18%).
• Outsourcing is being used by the big (Motorola, IBM and TI) and the not big (Cypress).
• Instead of building new fabs, the trend is to upgrade and fill-in existing fabs.
• Intel alone currently plans to cut its spending by $900 million this year.
• Spending by U.S. companies is expected to increase in the second half of the year as the recovery in chip sales continues.

Strategic Marketing Associates is a market research company whose focus is on the fab. For information about capital spending and new fab projects, contact Strategic Marketing Associates at 831-464-2669.