Chip market ready for three year boom time

Joe D'Elia, 30 year veteran of the chip industry and senior Dataquest analyst, gave VNU Newswire an exclusive low down this week on what to expect in the chip industry over the next few years.

The chip market is at the beginning of a new, positive cycle, said D'Elia confidently.

"We will see positive growth this year and even more over the next few years, but it will take a dip again in 2003," he predicted.

"The market is driven by capital investment and we haven't seen this for the last couple of years - in fact for this year it will be flat or slightly down. However, next year when people start making money again, they will start making investments again," he said.

D'Elia predicted another downturn in the market in 2003 due to oversupply: "But over the next few years the semiconductor industry will do well. Growth will be mainly led by DRam, microprocessors and applications specific processors such, for applications such as personal communications."

As for the major players in the market, D'Elia said the battle for supremacy would continue between AMD and Intel. He said recent news from AMD looked good, but the company still has a struggle ahead to keep up with market leader Intel.

He said the recent announcement of AMD's x86 64-bit processor Sledgehammer may provide, for a lot of people, a safe route to 64-bit computing.

"AMD is going down a different route to Intel, buttressed and supported with the current established architecture we have today," he said.

However, he said that Sledgehammer's success depended on the success of AMD's seventh generation processor, Athlon, the company's alternative to Intel's Pentium line of processors.

"If they can show that they can make Athlon successful then they will get the support. If Athlon fails, the 64-bit device will fail. For AMD, Athlon is make or break and will decide if the company stays in the microprocessor market," he said.

For Intel, D'Elia predicted that the next few years could see the chip giant perhaps losing its lead to newcomers in several different areas.

"Its interesting that Intel has realigned itself, as a supplier to the communications industry." he said. "It is absolutely right to do this. The PC was the technology driver in the first half of the 90s, but in the second half communications were the main driver. This is where the biggest growth and revenues are."

He said that although Intel has held a dominant position throughout the PC era, in the network and communications industry, where it is now also competing, it is not an established player.

"It obviously has built in advantages such as proven ability and its manufacturing capabilities, but someone could sneak past. There's a lot of new kids on the block, anyone could take it," he said.