Electronics Industry Update

Semiconductors

Worldwide Sales of Semiconductor Devices	Production Trends & Forecasts of Computers
Production Trends & Forecasts of Electronic Components	Production Trends & Forecasts of Communications Equipment

The total dollar value of worldwide semiconductor sales plummeted by 31.5% between December and January, according to preliminary data released by the Semiconductor Industry Association. Seasonal demand is always relatively weak during January, but that factor alone doesn't explain the magnitude of this January's plunge. Between December 1999 and January 2000, worldwide semiconductor sales fell 15.4% --about half the size of this year's decline.

Unit sales declined by a somewhat less dramatic, but still sharp, 19.3% between the final month of 2000 and the first month of the new year. During the same two months a year earlier, unit sales had dipped a much less precipitous 10.2%. Average prices -- which have been impacted relatively little by normal seasonal factors -- continue to weaken as well.

The estimated dollar value of semiconductor chip sales for January 2001 was 0.7% less than during the first month of 2000. The volume of unit chip sales this January was 3.0% lower than during January of 2000.

The average sales price (ASP) of all semiconductors (integrated, discrete, and optoelectronics combined) sold during January 2001 fell 14.3% from the December average price of 63 cents. ASPs this January remained a slight 2.3% above where they stood during January of 2000.

On a three-month-moving-total basis of sales -- the preferred method of analysis by many -- semiconductor growth slowed for the fifth consecutive month during January 2001. Although average dollar volume remained 13.7% ahead of its January 2000 pace, this was down from a 52.0% growth rate recorded as recently as last August.

End-market demand

Industrial production in the nation's electronic components industry group rose by a negligible 0.2% between December 2000 and the first month of this year. And gains for the final two months of last year were revised sharply downwards (to a cumulative 4.4% vs. the originally published 6.5% increase in output).

After the downward revisions to the November and December numbers, industry output during 2000 is now estimated to have risen to a level 74.5% above the cumulative production count for January-December 1999. January 2001 output by electronic-component manufacturers was 59.5% greater than during December 1999 -- a still-exceptional over-the-year increase, but the smallest gain recorded during the past twelve months.

Estimates from the Federal Reserve Board's monthly industrial production survey show that computer/peripherals industry output during February 2001 rose a modest 1.0% above the January production level. This followed a rise of exactly the same magnitude during the prior month, and was the fourth consecutive month of 1.0% or weaker growth. During the previous twelve months gains had averaged 3.2%.

Still, the industry does continue to expand, albeit much more slowly than over the past two years. Computers/peripheral equipment output has now increased on a month-to-month basis every single month since May 1998 -- that's 34 consecutive months and still counting. Revised estimates for full-year 2000 show industry output rising 43.8% above the 1999 total. But February 2001 production was at a level "just" 28.6% ahead of the second month of 2000 -- we say "just" because this is the smallest over-the-year monthly gain recorded by the industry in almost three years.

Output from the nation's communications equipment industry is estimated to have increased by 1.6% between January and February of 2001, following a gain of 2.6% during the first month of the new year. This followed sharply slower 0.6% growth during the final month of 2000 -- the kind of monthly gain that we thought would prevail over the first half of 2001.

Industry output has now grown in every month since December 1999, following a temporary "down" period when production declined for three consecutive months during the fall of 1999. Reports from industry analysts suggests that demand for communications gear has slowed markedly during the first quarter of this year, and weakness is starting to show up in government reports of new orders to the industry. Nevertheless, given the amount of work already in the "pipeline," output continued to expand at a healthy clip through the first two months of this year.

Overall communications equipment production during February 2001 was a strong 31.8% greater than during the second month of 2000. And -- based on recently revised estimates -- overall industry output during the past year was 24.3% greater than the 1999 total. Communications equipment industry production had increased by a much less robust 13.0% during 1999.