Semiconductor Assn. Predicts Turnaround : 18% Growth Forecast Met With Skepticism
Skepticism and even some laughter by semiconductor executives greeted a rosy forecast of an 18% jump to near record sales in 1986 after the worst slump in the industry’s history.
The Semiconductor Industry Assn.'s official forecast last week of “a dramatic turnaround” next year, with worldwide sales surging to $25.5 billion, brought no promises of new hiring by companies which laid off thousands of workers in 1985.
The 850 executives at the SIA’s annual dinner well remembered last year’s prediction of a 22% rise in sales in 1985. In fact, sales are expected to plummet about 17% by the end of the year.
The new forecast also did little to stem demands by some executives for protectionist measures against Japan if that nation doesn’t open its markets more to U.S. chip makers.
“We are recognizing that we must now consider forms of leverage that some would call protectionism, and that traditionally we have universally resisted,” Charles E. Sporck, president of National Semiconductor Corp. said in a speech.
“In the long run, we know that protectionism is a very bad form of trade practice,” he said. “But in the short run, we also know it can be useful to guarantee our survival. The Japanese have demonstrated that to us in the past. When you come down to it, protectionism beats extinction any day.”
Semiconductor pioneer Robert N. Noyce, vice chairman of Intel Corp., disagreed that protectionist measures should be considered.
Rather, he linked the industry’s problems with the national trade deficit, which he blamed on overspending by the federal government.
Come Out of Slump
Meanwhile, the SIA predicted that without any trade measures the industry will start coming out of its year-long slump in the final quarter of 1985, when worldwide sales are expected to rise about 3%.
Sales of the tiny integrated circuits that are the brains inside computers and other electronic equipment will pick up in the first half of 1986, according to the forecast.
U.S. companies will be the biggest winners with a leap of 25% in sales next year, the report said.
American manufacturers’ use of semiconductors, $11.6 billion in 1984 but only $8.3 billion in 1985, will increase to $10.3 billion next year, the report said.
Despite the positive figures, most executives took a wait-and-see stance.
“The last time we called a turn, we called it too early and got ourselves into trouble. I think this time we’re going to be conservative about hiring,” said Noyce.
“We want to actually see it happen,” said Gilbert F. Amelio, president of the semiconductor products division of Rockwell International Corp. “We are an optimistic bunch and we tend to forecast a little optimistically, but I do think there is a legitimate basis for this one.”
Worldwide semiconductor sales this year are expected to be about $21.6 billion, down from $26 billion in 1984, according to the SIA.
The forecast calls for an annual growth rate reaching 23% over the next three years, which would bring worldwide billings to more than $38 billion by 1988.
The SIA forecast, a consensus of 30 firms, assumes real demand for the integrated circuits will stay about the same as it was the past two years.
“If (demand) just stays flat and doesn’t get worse, then this forecast will happen because we will have burned off that excess inventory,” Amelio said.