If we can keep making faster, smaller and cheaper chips, we can produce better IT goods and services. Therein lies a problem: lately, falling demand led to oversupply in the semiconductor industry where rapid innovation is the key; stock goes out of date quickly, becoming virtually unusable.
Hence the concern over the recent 31.2% fall in the value in 2001 of world semiconductor market, mirroring the decline in IT demand. In some ways, it is a reality check after a decade of compound annual growth of almost 10%. Much of the increase in semiconductor use between 1990 and 2000 was related to the explosion of the Internet and mobile phones. Computers are still the main end market for semiconductors, but their share has slipped to 41% of the total from 46%.
The share of semiconductors going into the telecoms sector rose to 24% of the total in 2000, the latest OECD Information Technology Outlook says. Japan is the only region in which consumer electronics accounted for a sizeable share of the semiconductor market in 2001, at around 30%, while the share in Europe and the Americas was below 10%. But new growth in the game console market and the arrival of DVD and digital set-top boxes is expected to contribute to a recovery.
• OECD Information Technology Outlook, 2002.
©OECD Observer No. 233, August 2002