According to a recently revised market forecast by Forward Concepts (http://fwdconcepts.com), total DSP processor revenues will drop this year for the first time in the industry's 21-year history. An earlier forecast had called for a depressed 10% growth in 2001 (down from 30% growth in 2000), but this estimate has been scaled back significantly—the new projection is for a precipitous 25% drop.
Many of the industry's key players are showing a corresponding drop in revenues. TI is projecting third quarter revenues to drop 15% from already depressed second quarter levels. Other major DSP suppliers, e.g., Agere and Analog Devices, are projecting similar losses. While the semiconductor market has traditionally been cyclical, DSPs have thus far managed to sustain continuous year-to-year growth despite cycles in the overall chip market. Perhaps due to the increasingly important role that DSPs play in the semiconductor industry—in large part a result of their crucial role in communications applications—DSPs are no longer immune to semiconductor industry cycles.
There is evidence that, as a result of the current slowdown, semiconductor companies are investing less in product development. However, this might ultimately prove beneficial to other sectors in the industry. For example, decreased product development budgets bode well for core licensors, who might see increased demand from companies in need of a DSP, but without the budget to develop one internally. Similarly with chip production, where companies like Taiwan Semiconductor Manufacturing and United Microelectronics are well poised to pick up the slack created by cost-cutting companies moving to a fabless production model.
Most analysts believe that the demand for DSPs will surge again and DSP the market will resume vigorous growth. The $64,000 question is "when?" Forward Concepts expects the DSP industry to rebound by next year, with strong growth rates following over the next several years.
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