Chip industry sluggish, but Samsung optimistic

The semiconductor industry looks like it will be facing prolonged sluggishness, according to the latest forecast from Gartner. The research forecasts semiconductor revenue in 2005 to grow by 3.4 percent, way down from 2004's 23.9 percent.

It expects sequential quarterly growth to be negative in the first quarter of 2005 and flat at best in the second quarter. Seasonal slowdowns in electronic equipment sales are expected to exacerbate the effect of inflated inventory levels.

Gartner analysts said growth will remain muted in the first half of 2006 but begin to improve in the second half.

Meanwhile, Merrill Lynch has downgraded its "buy" ratings on South Korea's Hynix, the world's second-largest memory maker, and Taiwan's Powerchip Semiconductor Corp. to "neutral", saying weak demand for chips had triggered a faster-than-expected fall in memory chip prices. It has also cut its earnings forecasts for Micron Technology Inc. of the US and Germany's Infineon Technologies.

And as if to underline Merrill Lynch's point, yesterday Hynix reported disappointing fourth quarter results.

The world's second-largest chip maker, Samsung Electronics, however, continues to exude a bullish aura. On Wednesday, Hwang Chang-gyu, president and chief executive of Samsung Electronics' semiconductor operations, said that this year's revenue will rise 25 percent from last year's sales of $16 billion, as global chip demand will be underpinned by the growing use of microchips in mobile applications such as digital cameras, MP3 players and other electronic devices.