Chaos Theory
The Day The Chips Bounce Back
Arik Hesseldahl, 11.20.02, 8:43 AM ET
LAS VEGAS - Mark your calendars. There's an upturn coming in the semiconductors industry, and it starts on June 21, 2003.
That's the prediction from Brian Halla, president and chief executive of National Semiconductor (nyse: NSM - news - people ).
What started as a public relations gimmick to encourage attendance at his keynote address at the Comdex trade show held here this week, apparently has some solid mathematical and economic reasoning behind it. Using about two decades of semiconductor sales data, Halla worked with Dr. Amad Bahai, a professor at Stanford University, to build a complex mathematical model that incorporated chaos theory, neural networks, linear and nonlinear regression techniques and deterministic progression.
The prediction builds on the ups and downs of chip sales data through three important boom-and-bust cycles. The first peaked in roughly 1974, as demand for mainframe computers spurred semiconductor demand. The second came in the 1980s, with the dawn of the personal computer. The third peaked in 2000.
Does Halla's prediction still sound like a public relations gimmick? Maybe, but if nothing else, he is playing the optimist in an industry that badly needs one. Global chip sales fell so acutely in 2001--32% from 2000--that it is being called the industry's worst year ever. This year is proving to be better, but only marginally so. Global chip sales this year should improve by less than 2% over last year, according to the Semiconductor Industry Association. Take that in comparison to the 37% by which global chip sales grew from 1999 to 2000.
Halla's predictions aren't too far from off from the trade group's forecast for 2003, which calls for chip sales to grow by about 19%. But even at that rate, sales would still be behind their year-2000 levels.
If there's anything to be learned from the up-and-down cycles in chip sales, it's that market conditions can turn on a dime. Remember the summer of 2000 when it seemed that every kind of chip, from flash memory for mobile phones to microprocessors and PC memory chips was in short supply? It was apparent by that fall that the downturn was beginning, and it wasn't long before forecasters were calling for the grim 2001 that ultimately came true.
"The recovery will start before anyone realizes it," says Hans Geyer, an Intel (nasdaq: INTC - news - people ) vice-president who's watched his own share of boom-and-bust cycles in the chip business. He runs the division that produces the Xscale chips used so widely in Pocket PC handheld computers. "It will happen so rapidly that it will take a few weeks before anyone knows it has happened."
So when does Geyer think the recovery will hit? He hedged his bet: "On a Thursday."
For the record, the date that Halla selected is a Saturday.
AI
