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Rising prices set to boost semiconductor sales in 2006

The average selling price (ASP) for ICs is expected to resume growth in Q1 2006, following a 15% decline from its high in January 2005 and stagnation in August.
The average selling price (ASP) for ICs is expected to resume growth in Q1 2006, following a 15% decline from its high in January 2005 and stagnation in August. Market analyst Advanced Forecasting predicts that the continued increase in sales of IC units will strengthen fab capacity utilisation rates, driving ASPs upward and fuelling a forecasted upswing in the semiconductor cycle in 2006.

Although the ASP decline since February 2005 strongly resembles that of the 2001 recession, todays situation is different and substantially more optimistic, believes Advanced Forecasting.

“Overheating of IC revenues and IC units relative to their forecasted underlying demand is a non-issue, whereas in 2000 it was significant,” said Advanced Forecasting director Rosa Luis.

She went on to say that the situation also differs from 2000 in that then the rate of underlying demand was in decline while at the same time IC sales continued to soar, exacerbating the gap between the true demand and actual shipments.

“The current robustness of IC unit sales corroborates our forecast for fab utilisation that showed growth into Q4 2005. As IC units continue to grow, fab utilisation rates will increase until supply is constrained, forcing prices upward,” added Luis.

“Fab capacity utilisation has been an accurate measure of the health of the semiconductor industry. Fab capacity stood at 1.44 million wafers per week (8” equivalent) and utilisation reached 89% in Q2 2005, up from an 86% minimum point in Q1-05.”

In comparison, foundries were operating at 83% utilisation in September 2005, significantly lower than the 99% level one year ago, and partially due to the increased foundry capacity of 35% during the last year.

State-of the-art (300mm) fab capacity doubled since Q1 2004 to 100,000 wafers per week. Utilisation hovered around 91% in Q2 2005, slightly below the previous quarters level of 93%.
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