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IDC predicts more gloom for chipmakers
Thursday, August 09 2001
by Mary O'Neill


Revenues in the semiconductor and PC industry will have fallen by billions by the
end of the year, according to an IT research company. 

IDC says that in the past year, PC semiconductor suppliers have experienced a
complete reversal of fortune, struggling to fulfil extraordinary demand. The
company says that since last year demand has plummeted and the market will not
recover until after 2005. 



IDC forecasts that revenues in the total worldwide PC market will fall from
USD50.3 billion in 2000 to USD38 billion in 2001, a loss of USD12 billion,
predicting that the desktop semiconductor market will be hardest hit, with its
revenues expected to fall by more than USD11 billion by the end of the year.

 

The company said that in the US the decline in the PC market this year will be a
first, and that worldwide growth will only be in single digits. This overall
decline is expected to have a severe impact on the industry in general.



The company also said in terms of semiconductor components, microprocessors and
DRAM lead the downward spiral, with estimates that microprocessor revenue will
fall from USD27.1 billion in 2000 to USD22.2 billion by the end of 2001.

 

"Intel recently announced its microprocessor business has stabilised, and this
announcement generated optimism that the downturn in the PC chip business is
ending," Shane Rau, analyst with IDC. "However we believe this optimism is
unwarranted...While the microprocessor is a major chip inside any PC, it's only
one chip. Other semiconductor companies that make chips for the rest of the PC,
such as DRAM suppliers, are not doing well and I don't think they will begin to
recover until next year."



Meanwhile, a longer than expected recovery in the semiconductor market could have
major implications for industry and workers in Ireland. 



Intel, Xilinx and Parthus, three major players in the Irish semiconductor
industry, have all recently reported results and while Parthus announced strong
earnings, both Intel and Xilinx look to be struggling. All three are relying on a
recovery in 2002. 



In July, Intel announced that it would cut around 165 jobs, or five percent of
its 3,300 employees in Ireland. That news followed its second quarter results for
2001, recording steep drops in both revenues and profits. Net income for Q2 2001
was USD854 million, down a massive 76 percent from the second quarter of 2000. 





While any subsequent job cuts seem unlikely for the company, it has already
stalled construction of its third microprocessor fabrication plant in Leixlip,
Co. Kildare. Thus far, the company has spent approximately IEP2 billion on the
FAB 24 plant. That facility is to produce the company's current and
next-generation processors, including the Pentium 4. Nearly 1,500 construction
jobs were lost at Leixlip as a result of the decision to postpone work on the new
Fab 24 plant, which was almost half finished. 



In the same week, Xilinx, the multinational semiconductor manufacturer, announced
that its revenues for Q1 2002 were down 21 percent compared to the same period
last year. The company employs 360 people at an advanced R&D, engineering and
operations facility at Citywest, Dublin. Although the company remains committed
to not cutting jobs in Ireland, any continued slowdown in the industry would
surely put pressure on management to reduce costs.



Globally, the slowdown has hit Fujitsu, the Japanese conglomerate and
semiconductor maker, which reported that net losses would grow to USD1.8 billion
in the year to March 2002, on sales of USD43.6 billion. Earlier in July the
company announced a voluntary retirement programme to reduce its workforce by
9,000. Additionally, NEC, Infineon and Philips have also all shown signs that
they are struggling.