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Semiconductor Demand Strong

October 9, 2000

SAN JOSE, Calif. (AP) _ Worldwide semiconductor sales will show double-digit growth in the next three years as manufacturers find places for them in a variety of devices other than the personal computer, a new report finds.

Sales of semiconductors are growing at a rate of at least 25 percent as electronics manufacturers put them in cellular phones, gaming consoles, cameras, set-top boxes, handheld electronic organizers and other devices, Gartner Group research unit Dataquest says in a report released Monday.

Total worldwide revenues in 2000 alone are expected to jump 37 percent over 1999, to $231.6 billion, before moderating somewhat in 2001-02 and moving into a slight downturn in 2003, according to the Dataquest forecast.

The report, and several others, cast doubt on reports of sluggish computer sales in Europe.

Intel Corp. and Dell Computer Corp. have seen their stock tumble after warning upcoming quarterly earnings will show revenue below Wall Street expectations because of weak European sales.

But a report by European research firm GfK Group provides a rationale for those weak sales. It predicted Intel rival Advanced Micro Devices Inc. in its upcoming earnings announcement would reveal its European market share jumped to 12 percent in the July-August period from 8 percent the same period a year earlier after an aggressive push to bolster sales in personal computers and notebooks.

Dell uses Intel as its preferred provider of computer chips, meaning any loss of Intel market share would affect it more than most other computer manufacturers.

A separate report from research firm International Data Group predicted European semiconductor sales will grow by 13 percent this year.

An Intel spokesman said the company cannot comment on the reports since it has entered a mandatory quiet period ahead of earnings.

Intel, AMD and other chipmakers, meantime, have been scrambling to boost manufacturing in the face of continuing shortages of high-end processors and memory chips. Cellular phone makers such as Nokia and Ericsson and makers of electronic handhelds such as Palm and Sony are moving to make ``smart″ devices capable of accessing the Internet, but the equipment requires greater processing power with low heat consumption.

Flash memory, which retains information even when a device is turned off, has been in particularly short supply as nearly all mobile electronic device manufacturers compete for available supply. Analysts predict prices will remain high through 2001 until new factories begin ramping up production.

``The industry is running at high capacity, with reports of shortages and tight capacity for flash, microprocessors and some (dynamic random access memory) architectures,″ said Mark Giudici, principal analyst in Dataquest’s semiconductor group. ``Stronger demand and some product allocation in late 2000 will result in higher prices for DRAM, flash and some SRAM densities has forced lead times out beyond 20 weeks.″


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