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Semiconductor group gives rosy sales forecast

But the organization warns of a crucial need for new manufacturing techniques.

Broad-based demand for chips is expected to help sales in 2004 eclipse previous expectations, the Semiconductor Industry Association said this week. But in the future, the trade group says, more effort will be needed to keep the good times rolling.

Citing demand for PCs, consumer electronics, cell phones, telecommunications equipment and automobiles, the SIA's latest forecast predicts that worldwide sales of semiconductors will grow to $214 billion this year, surpassing 2000's record of $204 billion. In November, the SIA predicted chip sales in 2004 would total $194.6 billion.

"The industry is experiencing substantially stronger than expected growth in 2004, as a result of underlying strength in a broad range of end-use markets," said a statement from George Scalise, the SIA's president.

For the longer term, the SIA, as part of its regular midyear update, predicted a compound annual growth rate of 10.4 percent through 2007, when the group says worldwide sales will reach a quarter of a trillion dollars. Such a growth rate would be lower than those of the past several decades, but it would constitute "very healthy growth," the group said.

The SIA also projected that the industry's worldwide revenue in 2005 will grow by 4.2 percent to $223 billion. In 2006, the group says, it will decline by 0.8 percent to $221 billion. For 2007, the organization sees the industry rebounding to $247 billion, which would represent 11.7 percent growth.

While the industry may reach nearly $250 billion in revenue by 2007, chipmakers face technical barriers that could eventually derail their progress, the SIA said. As a result, the organization is calling for the creation of a national institute to promote semiconductor technology research.

The SIA's proposed Nanoelectronics Research Institute would combine the efforts of chipmakers, academia and the U.S. government. The institute would work toward overcoming expected barriers in chip development and keeping U.S.-based chipmakers at the leading edge of the industry. The SIA represents chip manufacturers in the United States

The group said its proposed institute would combine the efforts of students and researchers from universities with researchers in the chip industry, the SIA said in a statement. The goal is that the institute could develop new kinds of manufacturing techniques and new materials to fuel those processes by 2020.

The SIA and individual chipmakers have warned that progress in current semiconductor-manufacturing techniques, which focus on shrinking the size of transistors and packing more of them into chips, will eventually stop because of physical limitations. The SIA, which maintains an international road map that outlines expected progress in chip development, says that CMOS (complementary metal-oxide semiconductor) technology, which the industry currently relies upon, will reach its limits in about 15 years.

At that point, new materials and manufacturing techniques will be required if the industry is to continue its long tradition of boosting performance on a regular basis.

The SIA, which has been warning of the industry's long-term challenges for some time, has already established the Focus Center Research Program, which combines the semiconductor research efforts of five universities. Meanwhile, chip companies such as IBM and Intel have their own research programs.

One option that's been discussed by the SIA and chipmakers is nanotechnology, which involves manipulating materials on a small scale.

Technically, chipmakers are already in the nanotechnology business, as they work with materials with dimensions smaller than 100 nanometers. (A nanometer is a billionth of a meter.)

But new nanotechnology research has uncovered additional ways of creating and manipulating materials that could be used when manufacturing components such as processors and memory chips, said Juri Matisoo, the SIA's vice president of technology, during a speech at the Nanotechnology 2004 conference in Boston in March.

The chip industry is "coming to hard limits--not only technical limits, but economic limits," Matisoo said at the conference. "So we need to make changes

Cutting-edge chips now come in sizes of about 90 nanometers. Without manufacturing changes, it may prove next to impossible to shrink silicon-based chips below the 22-nanometer level--a size expected to make a debut in about seven years. That's because electrical forces become more difficult to circumvent as the size of the chip decreases, Matisoo said.