Some commentators are calling 2002 a "recovery year". Some recovery! IC revenue growth was likely around one percent, following a 32 percent decline in 2001. For most, it didn't feel like recovery. Despite improving wafer fab utilization, pricing pressure intensified. As a result, average IC selling prices are now below 1993 levels and margins have been

squeezed to the bone. Industry revenues have climbed off their bottom but are still below those of seven years ago. For these small gains we have to thank the consumer markets which grew steadily over 2001, while corporate purchases of electronic equipment were mostly stagnant.

Analysts' forecasts for SC/IC growth in 2003 range from nine to 25 percent - no one knows. The consensus forecast of 16 percent, though down from 23 percent just a few months ago, still seems wildly optimistic. Consensus forecasts of global economic growth in 2003 have fallen every month for the last six months. From the IC Growth Chart, it looks like we may already be at the cyclical peak of the growth cycle and heading down as we go into 2003. Looking on the bright side, analysts at BCA Research estimate that US corporate capital stock shrank in 2002 and,as a percent of GDP, is at a 40-year low. Once confidence builds enough to open corporate purse strings, there could be a significant upturn in buying. And because supply chain inventories are reaching all-time lows, any increase in end demand will feed straight through to boost IC demand. We continue to wait.

Two consecutive years of anemic revenues and the prospect of a third with, at best, low growth serve to re-emphasize the value of foundries to the IC industry. The number of IC companies with product sales sufficient to fill a next-generation 300mm fab is shrinking. Foundries are the natural solution for the rest. Foundries continue to enable the conception and growth of IC companies in the environment of a maturing market. This fosters continued competition and innovation and adds to global growth.

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