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Semico Optimistic About 2006

Semico IPI - Source: Semico Research Corp.

Phoenix, Arizona October 18, 2005 - Four consecutive months of growth for Semico’s Inflection Point Indicator (IPI) is no fluke. The rise in the IPI points to a prominent growth cycle beginning in 2006. The IPI has shown increasing strength, rising from 2005’s low of 14.2 in April to a high of 16.0 in August. The August IPI is a slight improvement of 0.3% over July’s elevated IPI of 15.9.

Since Semico’s IPI has proven to accurately forecast the market 8 to 9 months in advance, the current upward trend points to the February-May 2006 timeframe. We are optimistic heading into 2006. The August IPI is the highest on record, and coupled with four consecutive months of growth, 2006 will indeed be a robust year. Semico forecasts worldwide semiconductor revenues will increase 18.3%, reaching $262.1 billion.

Bucking the trend of industry pundits, Semico believes there are distinct applications driving growth. The demand for digital consumer platforms is clear-cut, as consumers are clamoring for audio and video content. This is witnessed in the rise in sales of consumer products including MP3 players, personal media players, and personal video recorders.

At the same time, Intel has introduced its ViivTM technology platform, targeted for PCs in the digital home environment. Additionally, Microsoft will have an update for its Windows XP Media Center Edition operating system that will have a special user interface, enabling easy access to multimedia, including on-demand online entertainment and content services. The mission of these two industry leaders reflects optimism that these are the types of applications that will be driving future growth.

Another positive sign in the industry is a rise in manufacturing capacity utilization. As utilization rates rise, this will have a positive effect on pricing. Already, aggregate semiconductor ASPs are on the upswing, improving from $0.458 in July to $0.508 in August, an increase of 10.9%.

Inventories are now under control, contributing to a positive 2005 and 2006 outlook. Inventory levels for electronic computers are down 26.7% from a year ago, and inventories for non-defense communications and electronic components decreased 7.2% and 18.0% year-over-year, respectively.

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. Semico offers custom consulting, portfolio packages, individual market research studies and premier industry conferences.

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