Chips get jolted back on course

Following last year’s slump in semiconductor sales and prices, the global market is expected to show modest growth in 1997 before returning to annual growth rates above 20% in 1998 and beyond.

The latest available book-to-bill ratio from the US-based Semiconductor Industry Association rose to 1.16 in October from 1.04 in September 1996, continuing a three-month upward trend.

The figures measure the value of orders booked against the value of shipments by US chip manufacturers. A ratio of less than one is considered unhealthy. And last year the ratio fell below one for the first time since 1993.

Global semiconductor revenue for 1997 will increase by about 13% to $155 billion, according to industry analyst Dataquest. For 1998 and beyond, Dataquest forecasts worldwide sales growth of 22% and above.

Last year’s revenue is expected to be $137 billion, a 9% fall on 1995’s peak. This was largely the result of excess stocks and capacity, and a fall in dynamic random access memory (DRAM) prices. `We expect 1997 to be a growth year for the industry,’ says Richard Gordon, semiconductor analyst at Dataquest.

The improved market should also enhance conditions for planned wafer fabrication plant investments postponed last year. Siemens has already given a cautious go-ahead for the second phase of its £1.1billion semiconductor plant in north Tyneside. Up to 800 new jobs are expected to be generated. Production at the first phase, which is expected to employ 1,000 workers, is due to begin this spring.

Dutch electronics group Philips should make a decision this year about a £1 billion semiconductor plant on the outskirts of Birmingham. Environmental protests could sway Philips to switch the investment to Asia.

Arlene Foster