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VLSI Research Predicts Average Growth In 2006

Following a flat 2005, VLSI Research predicts a positive outlook for the semiconductor industry in 2006. IC revenues are expected to increase 8%, while equipment for ICs and flat-panel displays should grow 6% over 2005.

Following a flat 2005, VLSI Research predicts a positive outlook for the semiconductor industry in 2006. IC revenues are expected to increase 8%, while equipment for ICs and flat-panel displays should grow 6% over 2005.

Of the major IC equipment segments, revenues for wafer fabrication equipment are projected to demonstrate the highest growth at close to 7%, followed by test equipment at 5% and assembly at 4%. Sales of display making equipment are anticipated to grow almost 6% in 2006.

The chip making industry is entering 2006 in a healthy state. The short-term indicators, such as inventories, unrealised capacity, and utilisation rates, are all pointing to a promising year for IC-making equipment. Furthermore, the technology roadmap is driving forward to 65nm production, 45nm development and new materials. For display equipment, the push towards Generations 7 and 8 panel sizes is stimulating equipment demand.

While these factors augur well for a positive year, one cannot discount conditions up the supply chain. Concerns about the U.S. economy and its impact on the semiconductor industry loom in the horizon. Uncertainty about the Federal Reserve's monetary policy, increased credit-card payments, tighter consumer credit, and volatile energy prices are all potential show-stoppers. These factors impact GDP growth with a lag of 6-12 months. With consumers now accounting for 50% of the demand for electronics, any variables that impede consumer spending will dampen chips and equipment growth. Nevertheless, VLSI predicts the industry will fare better this year compared to 2005.



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