Gartner Says Worldwide Semiconductor Market Will Continue to Show Gradual Improvement in 2006

STAMFORD, Conn.--Feb. 16, 2006--The worldwide semiconductor market is gradually improving and cautious investment in incremental capacity additions will keep the market in a pattern of modest growth during the next few years, according to the latest quarterly update by Gartner, Inc.

Worldwide semiconductor revenue is forecast to reach $257.7 billion in 2006, a 9.5 percent increase from 2005 revenue of $235.3 billion. In 2005, the market grew 7 percent. A mild slowdown is expected in 2007 with growth of 7 percent, followed by a cyclical market peak in 2008.

"The supply of semiconductor devices is becoming more constrained, and the downward pressure on the average selling prices of devices seen in 2005 has eased," said Andrew Norwood, research vice president for Gartner's semiconductor research group. "Any lengthening of device lead-times in coming months will be seen as further evidence of a tightening market."

Contrary to consensus expectations, Gartner Dataquest's Semiconductor Inventory Index, which is based on analysis of semiconductor inventory levels throughout the supply chain, showed a further reduction in semiconductor supply chain inventory levels in the fourth quarter of 2005.

"Low and declining inventory levels naturally lead to increased production to build inventories in anticipation of future demand, but in the face of elevated manufacturing capacity utilization rates, increased capital spending will be required to facilitate a rise in output," said Mr. Norwood. "Since our last capital spending forecast in December 2005, significant increases in spending for 2006 have been announced, suggesting growth in capital expenditures of about 10 percent this year."

These recent indicators suggest a more positive, albeit still cautious, outlook for semiconductor market growth, which is reflected in slight upward revisions to the forecast.

Additional information is available in the Gartner report "Semiconductor Market Forecast Alert: 1Q06 Update." The report is available on Gartner's Web site at www.gartner.com/DisplayDocument?ref=g_search&id=489317.

A more detailed breakout of the semiconductor forecast is available to clients of Gartner's Semiconductor Forecast Worldwide program. This program provides a comprehensive forecast database, which contains a detailed breakdown of the semiconductor forecast by application and by device. This industry-leading electronically delivered publication refreshes semiconductor forecast data for 100 applications and 40 device types each quarter. More information on Gartner's semiconductor research can be found at www.gartner.com/it/products/research/markets/markets.jsp#Semiconductors

About Gartner

Gartner, Inc. (NYSE: IT) delivers the technology-related insight necessary for its clients to make the right decisions, every day. Gartner serves 10,000 organizations, including chief information officers and other senior IT executives in corporations and government agencies, as well as technology companies and the investment community. The Company consists of Gartner Research, Gartner Executive Programs, Gartner Consulting and Gartner Events. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 3,900 associates, including 1,200 research analysts and consultants in 75 countries worldwide. For more information, visit www.gartner.com.