Forty per cent of semiconductor vendors are likely to leave the industry within 10 years, according to analyst Gartner.
Semiconductor manufacturers have multiplied from about 120 in the mid-1980s to about 550 last year. But competition has become so intense that many will have to find refuge in mergers and acquisitions.
Jim Tully, chief of research at Gartner's emerging technologies and semiconductor group, said: "The industry will experience significant consolidation," adding that pressures on semiconductors companies are increasing.
Manufacturing is becoming too complex and expensive, forcing vendors to run fewer but larger plants and to build greater numbers of standardised chips that can be customised for specific uses after manufacture.
"This will result in fewer chip manufacturers in the future, but it will not result in lower chip prices because the industry is capital-intensive and highly competitive," explained Tully.
The forces behind these changes include a greater proportion of semiconductor sales going into the consumer sector where margins where lower.
The industry will also be disrupted by new technologies such as carbon nanotubes, molecular transistors and protein-DNA logic.
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