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IPI Continues to Point to Upturn

Semico IPI

Source: Semico Research Corp.

Phoenix, Arizona March 13, 2005 - Semico’s Inflection Point Indicator (IPI) registered 15.5 in January, up from a revised reading of 15.3 in December. This marks two consecutive months that the IPI has risen. Since the IPI is designed to forecast the semiconductor market 8 to 9 months in advance, the January IPI is a predictor of the market conditions for the September to October timeframe. Therefore, if this trend continues, the Semico IPI points to an upturn occurring in the late 3Q to early 4Q05 timeframe.
At first glance, this appears to contradict worldwide semiconductor shipment data released by the SIA, which shows January sales were better than expected. This could lead to the general perception that 2005 will experience modest growth. Although January sales fell 12.7% from December, the January weekly revenue run rate of $4.2 billion was an increase of 8.8% over December’s run rate of $3.9 billion. In addition, January 2005 shipments were 22.8% higher than January 2004.

While the level of January semiconductor shipments is good news for the industry, the Semico IPI is based on a much broader view of the market, and takes into account other data points—including hardware sales, inventory levels, and PCB bookings and billings. The Semico IPI continues to predict a downturn in the first half of the year, with the industry picking up in late 3Q05. The illusory strength of January shipments can be attributed to:

• Backlog in the third and fourth quarters were shipped in January.

• Apparently, some of the actual sales that were reported were actually semiconductor inventory that was pushed into the distribution channel.

Semico forecasts worldwide semiconductor revenue shipments will fall 3.6% this year. Weaker end markets, revised guidance resulting in lower forecasts from leading semiconductor companies, a downward trend in ASPs (-2.8% in January) and a focus on inventory burn-off will all contribute to a weak first half. The market is expected to turn around in the second half of the year as OEMs begin rebuilding inventories.

Semico Research developed the Inflection Point Indicator to assist in forecasting semiconductor revenues approximately two quarters in advance. IPI combined with our bill-of-materials, end-market analysis and primary research has helped Semico Research accurately forecast the industry ahead of all the other prognosticators.

About Semico
Semico Research Corp is a marketing and consulting research company located in Phoenix, Arizona.
Semico was founded in 1994 by a group of semiconductor industry experts. We have improved the validity of semiconductor product forecasts via technology roadmaps in end-use markets.

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