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Chip Forecast Revised Upward

Alexei Oreskovic

The global semiconductor market will grow 10% in 2006, reaching $250 billion in sales, according to a revised trade group forecast.

The latest forecast for 2006 is higher than the World Semiconductor Trade Statistcs' initial projections, released last fall, which called for only 8% growth in 2006 chip sales.

While some investors are worried that the chip market is nearing a peak, the industry group projected solid double-digit growth through 2008 as consumer electronic devices incorporate an increasing amount of semiconductors.

The chip market will grow 11% in 2007 and 12.8% in 2008, according to the WSTS, in what it labeled a "challenging but generally healthy world economy."

Despite the better-than-expected forecast, chip stocks followed the broader market's decline Tuesday. The Philadelphia Semiconductor Sector index, which is down 13% this month, slid another 0.8% in midday trading.

Although the WSTS said the semiconductor market does not show a pronounced cyclical pattern, it noted that several geographic regions and product groups maintain cycles similar to previous historical patterns.

Asia Pacific continues to be the chip market's fastest growing region. This fast growth is not so much a result of its manufacturing role, but rather its rising domestic demand, the WSTS said.