The Hindu Business Line : Global semiconductor market slowing, says Gartner

Bangalore, May 16 The global semiconductor market is seeing a steady decline in growth rate, which would continue, and there would be considerable consolidations in the semiconductor industry.

Mr Jim Tully, Vice-President, Semiconductors, Gartner, said the growth rate for the semiconductor market fell to 11-12 per cent in 2001, from 17-19 per cent in 1990. It is expected to be around 5 per cent by 2020, he added.

He said the market is cyclical in nature, and goes through phases of high and low growth. This cyclical pattern is superimposed on the long-term trend of lower growth, he added.

Mr Tully said at present, the market size is about $280 billion. But there is over-capacity and over-supply, and too many companies, he added. Over the next 10 years, there would be considerable consolidation, and about 300 semiconductor manufacturing companies would exit the industry, Mr Tully said. That is a third of the total number of companies, he added.

Another big trend in the industry is increasing cost, he said. With each generation of technology, the cost of equipment used to manufacture chips is rising, he said.

To enjoy greater economies of scale, the chip makers would have to get bigger, and the only way to do so is to merge. They cannot rely on organic growth. There would be far fewer but much larger fabs, he added.

He said in the semiconductor market, there would be a shift in the direction of consumer electronics. In a decade it would account for two-thirds of all chips sold. At present it is little more than half. Mr Tully said the strength of the Indian semiconductor industry lies in design. He said not much of emerging technology is handled in India. The Indian industry must take on something that is quite new and ride up its growth curve rather than going for something that is quite mature, such as setting up fabs.

He said Taiwan came in at the beginning of a trend, and the industry there grew while the market was growing.

Mr Ganesh Ramamoorthy, Principal Research Analyst, Gartner India Research and Advisory Services Pvt Ltd, said market for semiconductors in India is about 1-1.5 per cent of the world market. Therefore, having a fab in India does not make sense today. He said many people feel a fab is a symbol. They feel if they do not have a fab, they are not there in the semiconductor industry.

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