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CHIP INDUSTRY SOAKING UP MONEY, REPORT SAYS

SAN JOSE - The semiconductor industry has been pouring money into capital spending this year but the trend won't last forever, according to a new report from industry market researcher Gartner.
 
Global spending on semiconductor capital will reach $44.8 billion this year, a 51% jump over 2003, the report said with worldwide spending on capital equipment in the industry projected to surge 64% to $37.3 billion. 

Those figures tower over the growth seen in 2003. Last year, chip capital spending grew just 8% and capital equipment spending increased 10%. 

Spending in specific segments of the industry, such as wafer fabrication equipment, packaging and assembly machines, and automated testing gear, are projected to increase by more than 63% each this year, Gartner said, adding that wafer fabrication plants reached 94% capacity at the end of the second quarter. 

Gartner predicts that spending on chip capital will grow 13% next year before shrinking 15% in 2006 and 17% in 2007 with a recovery in 2008 with growth of 12%.
 
The same trend will occur in capital equipment spending, it said.

The research company expects 15% growth in 2005, followed by a contraction of 18% in 2006 and 21% in 2007. In 2008, the company predicts, growth will return with a spending increase of 17%.
 
The semiconductor manufacturing equipment industry, as well as the chip industry, itself follows a cyclical path, Gartner said with chip manufacturers buying equipment as demand and selling it off as surplus once the demand is met.

HIGH-TECH VEHICLES TO DRIVE CHIP DEMAND

TOKYO, Japan - As electronics become the main driver of automobile innovation, semiconductor producers will be among the top beneficiaries, according to industry analysts.
 
Global automotive chip demand is expected to double to $24.5 billion by 2008, outpacing the 68% growth in the overall chip market, according to research firm iSuppli.
 
Automotive chips already range widely from micro-controller units that help boost energy efficiency to system chips that read fingerprints for keyless engine starts and to sensor chips for climate control.
 
Analysts say there is much room left for further chip-led innovation in automobiles.
 
"Electronics is where car makers can really start to do innovation and they can differentiate their cars from competition," said Drue Freeman, vice president of global automotive marketing and sales at Philips Semiconductors, a unit of Philips Electronics.
 
Besides power chips, which can be used to control hybrid car motors, image censor chips are expected to meet strong demand as they help car makers offer cutting-edge safety features.
 
Image censors, which are used widely in camera phones and digital cameras, can be embedded on the surface of automobiles to monitor the moves of vehicles around them and override drivers' steering, if necessary, to avoid a crash.
 
They can also observe the facial expression of a driver. If they find signs of drowsiness, such as frequent blinks, an alarm would go off to give the driver a warning.
 
"As people seek enhanced safety and comfort, five to 10 image censors are likely to go into a car in the future," Sharp Corp. spokesman Tetsuya Igarashi said.
 
Sharp is the world's largest maker of camera modules for mobile phones.
 
If 10 image censors find their way into a car, automotive demand for image censors could be as big as the $1.6 billion market for image sensor chips used in cell phones since automobile shipments are roughly one-tenth of mobile phone shipments, he said.

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