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Dip expected in chipmaking industry

Chip sales may be robust for now, but the companies that help keep the factories humming won't be as busy for the rest of the year, Gartner says.

Semiconductor sales may be robust for now, but the companies that help keep the chip manufacturing plants humming won't be as busy for the rest of the year, according to a new report by technology research firm Gartner. Semiconductor capital equipment sales are expected to fall off about 12 percent in 2005 with sales of $33.1 billion, and decline again in 2006 before returning to positive growth in 2007. Analysts are calling the trend a "mild downturn."

Last year, equipment sales surged to keep up with demand for home networking equipment, automotive applications such as telemetry services, flat-panel televisions, national security measures, nanotechnology and radio frequency identification (RFID) tags. But Gartner says production capacity has now exceeded demand, and companies are beginning to settle down with longer-term growth trends for the industry. Companies such as Applied Materials, Credence Systems, Lam Research, Mattson Technology and Novellus Systems are expected to feel the brunt of the downturn.