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Electronics Production | October 19, 2007

IC unit shipments will grow 10%

Recent data suggests that IC unit shipments will grow 10% in 2007, which would slightly exceed IC Insights’ original 8% forecast, and keep alive a streak of annual double-digit increases in IC shipments that dates back to 2002.
Strong shipments of DRAM (49%), NAND flash memory (38%), and interface (60%), data conversion (58%), and automotive-related analog ICs (32%) are driving overall industry demand and keeping IC shipments at a high level.

Dating back to 1980, the IC industry has twice seen periods of three consecutive years of double-digit unit growth—1982-1984 and 1986-1988. After those three-year spurts, IC unit growth dropped off significantly.

However, since 2002, IC unit shipments have been on a tear, growing by double-digit amounts each year (Figure 1). And, there seems to be no slowdown in sight. IC Insights believes there is a very good chance that unit demand will continue to increase at least 10% annually over the next 5-10 years as new and evolving applications in communications (cell phones) and consumer electronic systems (DTVs, handheld computing, music, gaming devices, etc.) continue to incorporate large quantities of IC units. Moreover, the continuing development of emerging country markets is also contributing to surging demand for IC units.

Average annual unit growth of 10% seems to be a “lock” for the industry. Using that baseline, future IC market growth will be largely influenced by changes in the average selling price (ASP) of devices. For example, 10% unit growth coupled with either a +5% or -5% change in ASP yields a 10-point range of market growth of between 5% and 15%.

On the one hand, strong annual IC unit shipment growth rates are good news for IC suppliers. Factories will be running at near capacity. However, continued pressure on IC average selling prices may cause a prolonged period of “profitless prosperity” for IC suppliers.

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