Organization predicts IC industry to rise 15.9% in 2006

This article was published by the Taiwan Headlines on March 29, 2006. It reports that according to a recent study released by the Taiwan Semiconductor industry Association, Taiwan's integrated-circuit (IC) industry is likely to grow 15.9 percent in 2006 and reach NT$1.29 trillion (US$4.03 billion).

By industrial segment, the study predicts that Taiwan's chip-designing sector to grow 12.3 percent to NT$320 billion (US$10 billion), its chip-making sector to grow 14.2 percent to NT$671 billion (US$20.9 billion), its chip-packaging sector to grow 23.6 percent to NT$220 billion (US$6.8 billion), and its chip-testing sector to grow 26.2 percent to NT$85.2 billion in 2006.

The study shows that in 2005, Taiwan's IC industry inched up only 1.7 percent to NT$1.1 trillion (US$34.6 billion), compared to the world average of 6.8 percent in that year. This lower growth rate of Taiwan's IC industry may be the result of excessive inventory backlogs at the plants of IC customers, which has dampened their demand for fresh chips.

However, Taiwan's IC industry still saw its revenue increase on a quarterly basis. In 2005, Taiwan's chip-testing sector grew 17 percent to NT$67.5 billion (US$2.1 billion), its chip-packaging sector grew 13.7 percent to NT$178 billion (US$5.5 billion), and its chip-designing sector grew 9.3 percent to NT$285 billion (US$8.9 billion). But Taiwan's chip-making sector lost 5.9 percent to NT$587.4 billion (US$18.3 billion) in 2006.

According to the study, although Taiwan's IC design sector posted only a moderate growth rate in 2005, as compared with the figure of 37 percent in 2004, the 2005 rate was still better than the world average. Meanwhile, although Taiwan's IC industry in general registered slow growth in 2005, the top 10 players in the domestic industry still had a combined revenue growth rate of 19.7 percent, higher than that of 15.6 percent in 2004. This reflected a trend in the local industry, in which the large companies are growing larger.

In the mean time, Taiwan's silicon-foundry sector saw its business improve in 2005. Particularly in the second half of 2005, many local chipmakers saw their capacity-utilization rates rise to cope with the growth of the world semiconductor industry.

Taiwan's DRAM (dynamic random access memory) chipmakers also saw their businesses grow in 2005. As most of the world's big players shifted to the lucrative production of NAND Flash memory chips from standard DRAM production, they relieved the overcapacity of DRAM production worldwide and therefore prevented DRAM prices from slumping further. Some Taiwanese DRAM makes even turned profits in 2005.

In 2005, the average selling price (ASP) of products manufactured by Taiwan's IC-packaging industry rose 5 to 10 percent. It also helped boost the revenues of Taiwan's IC suppliers. As a whole, Taiwan's packaging industry posted an outstanding performance in 2005.

According to the study, strong demand was the major reason why Taiwan's IC-testing sector registered a healthy growth in 2005. Many international integrated device manufacturers outsource testing devices from Taiwan as a result of booming business and inadequate capacity at their established test centers.

According to statistics released by the World Semiconductor Trade Statistics, Inc., in 2005, the world semiconductor market gained revenue of US$227.5 billion, up 6.8 percent from 2004. Meanwhile, the 2005 global sales volume was 455.5 billion chips, up 5.1 percent from 2004; while the average selling price was US$0.499 a chip, up 1.6 percent from 2004. In Asia alone, the revenue was US$103.4 billion, up 16.5 percent from 2004. Asia's growth pace was the fastest of all regional markets.