"The Semiconductor Industry - Today and Tomorrow", Doug Andrey,
Semiconductor Industry Association, February 13, 1996

Mr. Andrey discussed the rapid increases in sales and use of
semiconductors. Semiconductors as a percent of global electronics rose from
4.3% in the 1970s to 10.2% in the early 1990s. Semiconductors are found
increasingly in computers (61.6% of total uses in 1994) and in instruments
(9.7%), communications (14.5%), as well as in automotive, consumer and
government end uses in North America. For example, semiconductor dollars
per vehicle have been rising since 1984. In 1994, they reached a new high:
$175 per auto. On a worldwide scale, semiconductors are used somewhat less
in computers (48.7% of total) but more intensively in communications
(14.8%) and in consumer (19.5%)  markets. Total worldwide semiconductor
market shares have been changing in the last 14 years. The U.S. share was
highest in the early 1980s (a peak of 58% in 1982). A cross-over point was
reached in 1985 when Japan's market share exceeded that of the United
States. The trend reversed itself again in 1992 when the U.S. share rose
higher. Since 1986, other nations have increased their market shares of the
global semiconductor market. In 1994, "others" reached almost 15% of the
total.

Capacity utilization appears to be a good indicator of seminconductor
industry profitability in the United States. When utilization rates fell to
34%, as they did in 1984, pre-tax profits margins were - 9.6% (losses as a
percentage of sales revenues). When rates rose to 82%, as they did in 1994,
pre-tax profit margins soared to 20.2%

R&D expenditures have been rising in the industry since 1980. R&D as a
percentage of sales peaked with a median of 12.7% in 1986. The median has
been at or above double digit levels in every year since 1985. Capital
spending on new equipment and facilities has been cyclical. In 1984,
capital spending as a percentage of sales peaked at 21.8% (gross spending
level), but has remained above 13% for most of the 1980s. It reached 20.3%
in 1994.

As a result of R&D and new plants, the real price of semiconductors have
declined in almost every year since 1982. For example, while the
manufacturing costs per wafer are rising (due to more complexity) the DRAM
price per bit index fell from 100 in 1982 to 4 in 1994. Growth rates of
worldwide semiconductors appear to be influenced by the business cycle.
Chip growth rates were almost 40% in 1988, they fell to about 2% in 1990.
By 1994, the rates were up over 30% annually.

Recent forecasts of worldwide semiconductors show that the United States
will sell almost $75 billion by the year 1998, Japan an estimated $65
billion, other Asian nations $50 billion, and Europe will sell $45 billion
of new chips in that year. Worldwide sales for MOS DRAM semiconductors are
likely to reach $75 billion and MOS memory an estimated $90 billion in
1998.