On May 20, 2003, Gartner lowered its forecast for worldwide semiconductor-market growth that year from 8.9% to 8.3%—a cut of 0.6 percentage points. It still expected the market to reach about $168 billion. The downgrade reflected weak business confidence and little evidence that companies were ready to restart corporate-PC replacement, even as some consumer and mobile markets remained healthy.
How Gartner’s forecast changed
The May revision was the third step down in expectations over roughly six months. Gartner’s semiconductor research group was then known as Dataquest.
| Forecast date | Forecast for 2003 growth | Projected 2003 market | Comparison base |
|---|---|---|---|
| Late 2002 | 12.1% | $171.8 billion | Earlier estimate of the 2002 market; see EDN’s report. |
| February 24, 2003 | 8.9% | $167 billion | $153.4 billion for 2002, as reported by DigiTimes. |
| May 20, 2003 | 8.3% | About $168 billion | Contemporaneous accounts differ on the revised 2002 base; see the discussion below. |
The change from 8.9% to 8.3% was a 0.6 percentage-point reduction in the annual growth rate, not a 0.6% reduction in projected revenue. Gartner still expected the market to grow year over year. The May forecast and its demand outlook were reported by EE Times and EDN.
Why the growth-rate cut came despite a higher dollar forecast
The two May figures measure different things: the projected 2003 market value and its growth against the prior year. Gartner raised its estimate of the 2002 baseline after the February update. With a larger prior-year figure, the 2003 market could be forecast at about $168 billion while its percentage growth was lower than previously projected. EE Times’ follow-up explained the change in the dollar estimate.
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Contemporaneous reports do not give one consistent revised 2002 value. Reuters coverage carried by the Los Angeles Times reported about $152 billion, while the EE Times follow-up cited $155 billion. Gartner’s February forecast had used $153.4 billion. These figures reflect changing estimates and reporting differences; the available accounts do not establish a single reconciled May baseline.
Weak business demand clouded the outlook
The immediate problem was limited visibility into demand, especially from companies. Semiconductor sales fell approximately 3.5% sequentially in the first quarter, although March sales were stronger than expected. Gartner anticipated mildly positive sequential growth in the second quarter, but that improvement did not establish that demand would hold up in the second half. The Register’s May 20 account described the expected second-quarter direction.
Gartner’s concern was that businesses were not confident enough to resume replacing aging PCs. A stronger corporate-PC cycle could lift chip demand across a wider part of the market, but the signs that it might start were not yet convincing. The February outlook had anticipated a second-half recovery; by May, weak business confidence left that expectation less secure.
Geopolitical risks eased, but confidence did not return
By May 2003, the Iraq War had ended and the SARS outbreak appeared to be coming under better control. Those developments reduced sources of uncertainty, but they did not by themselves prompt businesses to spend more on technology. Gartner’s central issue remained whether companies would make the investment decisions needed to renew PCs and support broader semiconductor demand. Its contemporaneous summary is available from Vision Systems Design.
Consumer and mobile products offered pockets of growth
The market was not uniformly weak. Gartner identified several areas expected to support chip demand, including digital cellular handsets, flat-panel displays, digital-video products, LCD-driver devices and application-specific chips for consumer electronics. It also pointed to mobile-related memory, DSP-based integrated circuits and CMOS image sensors. These growth pockets helped explain how Gartner could still project overall market expansion while remaining cautious about business demand. The May coverage lists these areas in EE Times and Vision Systems Design.
Mobile handsets and consumer electronics were supporting demand; corporate PCs were the missing ingredient for a broader recovery. Strength in one set of end markets did not show that business IT spending had turned around or that the whole industry had entered a durable upcycle.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What the May forecast did—and did not—say
- It did signal slower growth than Gartner had forecast earlier. The path from 12.1% in late 2002 to 8.9% in February and 8.3% in May showed successive reductions in expected growth.
- It did not predict a semiconductor-market contraction. Gartner’s May outlook remained positive at 8.3% growth.
- It pointed to an uneven recovery. Mobile and consumer demand appeared healthier than corporate-PC demand.
- It did not confirm a second-half rebound. Gartner’s limited visibility into business spending made the timing and breadth of recovery uncertain.
The May 20 forecast was a contemporary estimate, not a statement of the eventual full-year result. The available accounts establish what Gartner expected at the time, not whether the forecast was ultimately met.
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