IDC Expects Mobile Phone and PC Replacement Cycles to Drive 18% Semiconductor Revenue Growth in 2004

FRAMINGHAM, MA – DECEMBER 30, 2003 – As 2003 closes, growth expectations for the semiconductor market are on the rise, particularly after a very strong recovery in the second half of the year. IDC forecasts a healthy growth rate of 18% in 2004.

Stronger than expected mobile phone and PC shipments have stabilized ASPs and increased capacity utilization rates among suppliers. IDC expects that unit shipments will grow in double digits this year and next year for both mobile phones and PCs, which will drive a healthy growth cycle for over half of the semiconductor industry. From 2003 to 2008, IDC predicts that the semiconductor market will grow at a compound annual growth rate of 12%, rising from $160 billion in revenue this year to $282 billion in 2008.

From a regional perspective, China, as the largest consumer of mobile phones and the second largest consumer of PCs, will continue to drive mobile phone semiconductor and PC semiconductor growth most of all. Pressure on OEMs and chip suppliers by investors to increase profits and revenue has been a driving force in a general industry trend toward outsourcing. “As a result of this ongoing trend, China has become a fertile ground for disruptive innovation as its low-cost suppliers naturally aspire to move up market. IDC expects these emerging Chinese semiconductor companies will play a key role in shaking up the competitive ranks among original equipment manufacturers (OEMs), original design manufacturers (ODMs), and semiconductor suppliers over the next five years,” said Mario Morales, vice president of IDC’s Semiconductor research at IDC. “Mainland Chinese semiconductor demand currently represents over one quarter of the $60 billion total for Asia/Pacific and will account for almost half of the entire region by the end of our forecast period.”

IDC finds the following are key trends to watch in this market:

• Mobile phone shipments (including PHS/PAS) surpass 530 million units this year, while PC shipments grow by 11% surpassing 152 million units. IDC expects double digit growth in units for both markets in 2004.

• In 2003, Japan surpasses The Americas as the second largest consuming region in the world. Japan's growth is led by export growth, while domestic demand remains muted.

• Asia/Pacific region becomes the dominant region for PC and mobile phone demand and production with China accounting for the bulk of this region's growth.

• Taiwan begins to aggressively aggregate IP. Taiwan and China drive fabless start-up activity, while the U.S. and Europe slow down.

• Capital spending for suppliers grows strongly in 2004 after a few years of decline.

• Suppliers focus on 2.5G, WLAN, and broadband and cellular infrastructure. Wireless and analog IP become essential building blocks.

• IP houses and fabless wired communication chip suppliers experience the most visible shakeout, while flash memory, analog, and wireless semiconductor vendors also consolidate.

• Traditional business models evolve to benefit those that are focusing on IP, brand, usage models and customer service. Successful suppliers continue to emphasize more on market segmentation, brand, and utility as technology becomes more transparent to consumers.

For more information about IDC’s Semiconductor research, please contact Pennie Robinson at 508-988-6912 or probinson@idc.com.

About IDC

IDC is the premier global market intelligence and advisory firm in the information technology and telecommunications industries. We analyze and predict technology trends so that our clients can make strategic, fact-based decisions on IT purchases and business strategy. Over 700 IDC analysts in 50 countries provide local expertise and insights on technology markets. Business executives and IT managers have relied for 40 years on our advice to make decisions that contribute to the success of their organizations.IDC is a subsidiary of IDG, the world’s leading technology media, research, and events company. Additional information can be found at www.idc.com.

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