On the heels of generous first-quarter results for chipmakers, the leading semiconductor trade group said Monday it will soon hike its forecast for 2004 growth to over 20%.
Critically, the Semiconductor Industry Association said one of the "leading drivers" of growth is that companies are spending increasing amounts of money on information technology. Faster corporate spending is necessary to fuel a recovery that has until recently been led by consumers.
In the first quarter, corporate spending on IT software and hardware posted a third-straight quarter of double-digit growth, up 11.5%, according to government figures. The shift will likely prompt industry pundits to nudge their chip sales outlook higher.
At its last official forecast in November, the SIA had predicted 2004 sales would grow 19.4%. It will issue its next biannual forecast, featuring the upward revision, on June 9. During Monday's conference call, SIA analyst Doug Andrey declined to be more specific about how much the group would increase its forecast above 20%.
In 2003, semiconductor sales clocked in with an 18.3% gain to $166 billion, outpacing the SIA's forecast for a sales increase of 15.8%.
On a conference call, Andrey said some of the biggest end markets for chips -- notably, PCs and cell phones -- are growing faster than expected.
In November the SIA expected that PC sales would grow 11% in 2004, up from 170 million units sold last year. But it now believes PC revenues will rise by 13% to 15%. About 30% of semiconductors end up in PCs, which remains the largest single-chip end market.
Also, the SIA initially thought cell phone sales would rise by 10% in 2004, up from 480 million handsets in 2003. However, the group now says growth of 15% to 20% is more likely. Cell phones account for 12% of semiconductor consumption.
Not only are handset sales surging, but cell phones are becoming more saturated with semiconductors, given their high-end functions like digital cameras and color displays.
Separately Monday, Banc of America analyst Mark FitzGerald reacted to the latest crop of chip data by saying sales momentum may be peaking in the industry. He believes year-over-year comparisons for chip sales may top out in the early summer.
Indeed, plenty of money managers
have been exiting the sector on the assumption that business can't improve much more from current levels.