Stock prices in the semiconductor market are beginning to rise, giving hope to beleaguered chip fabricators and suppliers, despite revenues being lower than in 2001 when the tech bubble burst.
In an upbeat market assessment, business consultancy Kline & Company predicted that the light at the end of the tunnel was now visible - even if the tunnel exit is still some distance away.
"The suppliers we surveyed for our study told us that their customers have finally been asking for new products to test again," said Li Wang, engagement manager in Kline's electronic chemicals and materials practice.
"While this won't necessarily mean an immediate increase in orders, it's at least something."
Although the current market for compound semiconductors, including silicon-germanium wafers, is only about 5 per cent of the overall semiconductor market, its growth potential is believed to be greater than for traditional silicon.
From 1997 to 2000, the total market for compound semiconductors grew by an average annual rate of 38 per cent, in comparison to 15 per cent for silicon-based chips, according to the study.
The report, The Global Outlook for Chemicals and Materials in Compound Semiconductors, 2002-2007, found that even after the entire electronics industry suffered substantial losses during 2000 and 2001, the market for compound chips dropped a further seven per cent in 2002.
But Kline's study predicts a gradual recovery, with growth of 15 per cent a year through to 2007.
"Barring the sudden emergence of the next 'killer app' in the electronics segment, we don't anticipate a drastic, 'v-shaped' recovery for compound semiconductors," Wang said.
"The market will gradually pick up pace as the overall economic condition improves."
Kline expects compound semiconductors to continue being used in mobile wireless communications, especially for power amplifiers in handsets such as mobile phones, pagers, and global positioning systems.
"Because of inventory build-up stemming from lack of demand, the [semiconductor] industry has been in full-blown cost-cutting mode," added Wang.
"But performance is the key selling point for compound semiconductors, and companies can't grow without allocating sufficient resources to R&D."
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