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Strong growth predicted for chip industry

Latest upswing in global chip revenue won't wear off until 2006, market researcher iSuppli says.

Global chip revenue will touch $226.5 billion this year, a 25 percent increase over 2003, according to a revised forecast from market researcher iSuppli.

In April, iSuppli had predicted 19.8 percent year-over-year growth for the global chip industry. The new forecast is in line with estimates from other market researchers such as Gartner, which has projected that chip sales worldwide will improve by 25 percent in 2004. The Semiconductor Industry Association has quoted a figure of $214 billion for the year.

Good news is also awaiting wireless communications, according to iSuppli. The long-suffering sector will finally return to growth in 2004, taking overall electronic equipment revenue to $1.16 trillion this year, up 10 percent from $1.06 trillion in 2003, iSuppli said.

The El Segundo, Calif.-based company does not predict that the robust growth will lead to a severe market downturn, as was the case in 2001. In 2005, the industry will see a respectable 11.8 percent growth to $253.3 billion, iSuppli predicts. Growth during the last year of the current upswing, 2006, will be flat.

Unlike the dot-com-driven increases in 1999 and 2000, iSuppli asserts that the current rise in the market is being propelled by strong fundamentals on both the supply and demand sides.

"All application markets for semiconductors are back in positive territory in 2004, and all the regions will experience growth this year," Gary Grandbois, principal analyst at iSuppli, said in a statement.

A new growth cycle expected to commence in 2007 will see sales rising 9.2 percent to reach $276.6 billion, iSuppli predicts. Chip revenue will increase another 10.4 percent in 2008 to hit $305.4 billion.