Manufacturers are exuding optimism. The Semiconductor Industry Association (SIA) reports worldwide sales of semiconductors reached $17.3 billion in May 2004, nearly a 37-percent increase from a year earlier. However, not all forecasts are buoyant for next year. Several stock analysts and a leading industry research firm are predicting slower growth.
      "It looks like we will peak this year in terms of growth rates," says Jim Feldhan, president of Semico Research, a Phoenix-based company that calculates semiconductor forecasts. "The amount of capacity that's being put into place this year and last year -- and which will come online next year -- will probably exceed market demand in 2005."
      Among the factors Feldhan cites is a slowdown in some key consumer markets. He says cell phones, a fundamental market for semiconductors, will be at the end of a three-year growth cycle in 2005 and will likely moderate. He sees a similar trend in the PC market as well.
      Other factors that may contribute to slower growth in the industry, Feldhan says, are a post-election year slowing of GDP, the federal budget deficit, continued higher gas prices and higher interest rates. He says all point to weaker consumer demand in 2005.
      "Put it all in a blender and it builds the scenario for slowing demand," he says. "We will see semiconductor prices fall and revenue growth will slow. The good news is we don't believe there will be a complete collapse like 2001. There will be a dip for three quarters and then we will recover with things looking pretty good for 2006 and 2007."