Semico Reiterates 2004 Forecast

Semico says 3Q05 will be weaker than originally expected according to the latest reading of the Semico Inflection Point Indicator

Phoenix, Arizona January 17, 2005 - It would be easier to predict the outcome of a horse race with a furlong to go than at the starting gates, but some people would lose their money even if they could wait that long to place their bets. It is also easier to make an accurate forecast for total worldwide semiconductor sales near the end of the year than at the beginning of that year; but some forecasters can miss, even then. In recent weeks some semiconductor analysts have been revising their forecasts for total annual semiconductor sales growth downward into the low twenty percent range. With only one month of sales still not reported by the SIA (Semiconductor Industry Association), it is hard to see how the annual growth rate could be that low.

At the beginning of 2004, Semico Research Corp. forecasted an annual growth rate of 26.8% for total worldwide semiconductor sales in 2004. Through the last reported SIA month, November, sales are on track to slightly exceed that forecast. If December sales equal Semico’s forecast, $20.8 million, then annual sales growth in 2004 will have been 28.8%. From the vantage point of early January 2005, that seems to be easily attainable. November sales were 4.0% above Semico’s forecast, hinting at a good December; and sales of $20.8 million in December fits past trends. If December sales are within plus or minus 10% of Semico’s forecast, then the annual growth rate for 2004 will be in the range of 27.5% to 30.0%, slightly above Semico’s beginning of the year forecast.

Could the annual growth rate fall into the low twenties? For annual growth to fall as low as 23%, reported SIA December sales would have to fall to $11.2 million, a decrease of nearly 40% from reported November sales and a decrease of nearly 35% from the previous December. That doesn’t seem likely. If December sales had been that low, screams of despair would have been heard all over the semiconductor industry. Instead, there has been some murmuring about inventories building, but no shouting yet about sales going away.

There is cause for concern. According to Semico’s IPI (Inflection Point Indicator), an index that predicts semiconductor sales trends six to nine months in advance, the semiconductor industry is at an inflection point. December will be the high point. Sales will turn down in the first quarter of 2005 and not turn up again until the second half. In fact, Semico’s latest reading in our January IPI warns that 3Q05 will be weaker than originally expected. This would indicate a delayed market recovery, pushing the start of the recovery out one quarter—from 3Q05 to 4Q05. Total worldwide semiconductor sales will be down 5.5% in 2005; but a forecast for annual semiconductor sales growth in the low twenty percent range in 2004 is too low, requiring a downturn that has not yet happened.

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. For more information, see the Company’s website at www.semico.com.

Semico Research
Phoenix, Arizona
T: 1 602 997 0337
www.semico.com

Contacts:
Jim Feldhan
Semico Research
T: 1 602 997 0337
jimf@semico.com