SOURCE: Advanced Forecasting

November 14, 2006 08:00 ET

Overheating May Bring an End to the Current Semiconductor Cycle

SARATOGA, CA -- (MARKET WIRE) -- November 14, 2006 -- As the semiconductor industry nears five years of continuous growth, an indication that overheating may become a threat has emerged with September's worldwide IC revenues number. A steep increase of 4.5% over the previous month has nearly brought actual sales to converge with their forecasted Underlying Demand. In addition, it steepened the slope of growth to an angle that may trigger overheating, the precursor for a downturn, if it continues into Q4-2006.

"The peak in Underlying Demand is not predicted to take place until the second half of 2007, however, a period of overheating prior to it will cause the turning-point to occur earlier," said Moshe Handelsman, President of Advanced Forecasting. "Seasonal factors should soon dampen the steep slope of growth in IC revenues, reducing the threat, but if the growth continues, we'll begin to see signs of trouble."

Contributing to the possibility of an earlier correction is the extended period of overheating in worldwide IC units. While IC units have remained in line with their Underlying Demand since 1999, they have diverged from it on a very steep slope of growth since March 2006.

As we are approaching that time of a year of forecasting 2007 growth, Handelsman added that "we advise decision makers to pay more attention to whether there is a major turning point embedded within a forecast of annual growth rate than to the absolute value of the forecasted growth. The former is more detrimental to the bottom line. Take for example: 2000 to 2001. The growth rate of 2000 was 36%. However, October 2000 was the peak month followed by the most disastrous recession for the industry."

Founded in 1987, Advanced Forecasting is a leader in forecasting demand for semiconductors, semiconductor equipment by segment, and materials industries. Its unique features are using purely quantitative input and never retroactively modifying its forecasts. Advanced Forecasting provides the industry's most accurate forecasts and has acquired a user base of more than 400 companies worldwide.

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