Concerns that the semiconductor market may stop growing this year are being played down with suppliers banking on new levels of demand from the mobile and automotive sectors.

¡°Inevitably the market will flatten, it's just a question of when but we don't think it will be in the second half of this year,¡± said Alan Matthews, European marketing director at Xilinx.

According to David Wollen, marketing director at Renesas Technology Europe, mobile handset forecasts have been revised upward this year and demand remains strong, particularly at the low-mid end of the market.

¡°However, this has been offset by a continuing trend to build outside Europe, especially China, which has accelerated this year. Acceptance of new models launched this year will be critical,¡± said Wollen.

¡°The question mark is whether the European handset OEMs will accelerate the transfer of their productions to Asia in Q4,¡± said Fabrice Moizan, European VP of sales at Cypress Semiconductor.

According to Moizan, customers have built up some certain level of inventories since the end of last year due to bullish forecasts driven by the mobile phone industry, the Chinese impact, and extended lead-times that forced them to anticipate potential supply issues.

Talk of a possible "slow down" in the market is making customers very cautious, said Xilinx's Matthews. ¡°But we are seeing the wireless communications market driving the business more as 3G is slowly being adopted,¡± said Matthews.

Automotive is seen as another growth market for semiconductor sales in Europe as it is less affected by production moving offshore. ¡°There are many new designs starting to come through, mostly MCU/MPU-driven.  Europe remains at the forefront of developments in the automotive industry and we are very bullish about the prospects for the next few years,¡± said Wollen at Renesas.

¡°July was overall an excellent month in term of bookings and as a consequence, due to a less stressful situation on the supply side, the average lead-time for product delivery has now decreased to a point where we can consider that September should be a good billing month,¡± said Moizan.

¡°We continue to believe in strong growth for the industry in 2004 and high single-digit growth for 2005. Towards the end of 2005 and certainly 2006 it looks like the market will show a strong decline. Specifically in Europe the trend is similar, but much less bullish. Demand growth continues and somewhere around 5 percent in Europe next year looks reasonable. This is in local currencies -- growth in dollar base would be much stronger of course,¡± said Wollen.

¡°The rest of telecoms has remained fairly static and we don't expect great changes there,¡± he added.

Moizan suggests that with fab capacity usage still close to 90 percent, and if the July bookings trend goes the same way in August and September, then ¡°Q4 could be a better quarter than what the gloomy comments coming from some analysts are showing right now.¡±

By: DocMemory
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