Peter Clarke Courtesy of EE Times Europe (07/25/2008 6:51 AM EST)

LONDON — We reported earlier this week that Malcolm Penn of Future Horizons is confident that demand for ICs will hold up, powered by the appetite for electronics in the emerging markets. That demand and a current lack of investment in manufacturing must send chip prices and chip market value spiraling upward, he argued. Meanwhile NXP, ST and Infineon have all expressed a cautious pessimism about market conditions, suggesting that the high price of oil is having its effect and demand for ICs is dipping.

The market stands at a crossroads. The evidence from the last major market dip is that the more general financial analysts tend to call it right, while the industry-specific analysts tend to err on the side of optimism and on the side of what their industry would like to hear.

That is not to say things will be the same this time around.

In fact, possibly after being burned by the 2000 crash, industry analysts as a group are tending to offer chip market growth figures in the single digits, in the range of 4 to 7 percent for 2008. Penn's own range is from 7 to 10 percent.

This time it is the financial analysts and general economists that are pointing to relatively high global GDP figures. The International Monetary Fund recently indicated global growth moderating from 5 percent in 2007 to 4.1 percent in 2008 and 3.9 percent in 2009. It seems certain that growth in the G7 economies will be below average, even nonexistent in some, but compensated for by China, where GDP growth is now projected to moderate from 12 percent in 2007 to around 10 percent in 2008 and 2009.

In the European region oil-rich Russia continues to boom and the eastern bloc including Poland, the Czech and Slovak republics and Hungary continue to prosper, as attested to on our own Eastern Europe page.

But with the oil price volatile and the down-side risk of inflation now being taken as seriously as that of recession, it is clear that the prognosticators are going to be tested again.

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