Do not overlook the impact of the ongoing capital goods boom on semiconductor sales while focused on the current stall in the growth of sales for semiconductor devices and the equipment to manufacture them. Semiconductor parts consumption in end products has continued to expand, mostly for capital investment products, while the early 2004 surplus of parts and capacity is still being absorbed. So the stall in the semiconductor and the equipment market will be followed by renewed growth in 2005, rather than a slide into a sustained market decline. The renewed growth will be at a 10-15% annual pace, not the 40%+ pace of last spring. If semiconductor and equipment sales resume growing at a stronger pace, a two- to three-quarter inventory adjustment cycle will begin this summer.
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