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Europe chip sales down by a third

The European semiconductor market has suffered less than the global average this year but will still have dropped 33 percent by the end of 2001.

Matthew Broersma

LONDON--The European semiconductor market has suffered less than the global average this year but will still have dropped 33 percent by the end of 2001, according to new figures from market researcher Gartner Dataquest.

Speaking at a chip seminar in London, Gartner analyst Andrew Norwood said European semiconductor revenue for 2001 was projected to be down 33 percent from the previous year, compared with a 35 percent drop in global chip revenue. The drop is the largest in the industry's history, Norwood said.

Despite the depressed figures, Norwood noted that the industry is marked by cyclical growth and said next year will see the beginning of an upswing that will be in full force in 2003. Gartner expects European semiconductor revenue to rise slightly to $30 billion in 2002--up from a projected $29 billion this year--and to hit 31 percent growth in 2003.

For the next two years, growth will be fuelled by the increasing importance of chip intellectual property (IP) companies, the entry of China into the World Trade Organization and emerging technologies like wireless and digital video, Gartner projected.

IP companies sell designs that can be customized by chip manufacturers for a variety of tasks. Manufacturers are increasingly relying on such designs as a way to boost the power and efficiency of their processors without additional research spending. Chip IP revenue grew at 40 percent in 2000, and Gartner expects this trend to be unaffected by the global economic slowdown, with revenue increasing at a compound annual rate of 38 percent for the next four years.

No single new technology is on the horizon to fuel chip demand, but Gartner sees a combination of several new markets sparking growth, including the launch of GPRS (General Packet Radio Service) and third-generation mobile networks, which will demand new handsets. Europe is seen as a particularly fertile market for car navigation equipment, digital set-top boxes and smart cards.

China's entry into the WTO next year will also create a massive potential market for technology companies, according to Gartner.

Staff writer Matthew Broersma reported from London.