Advanced Forecasting said today that a turning point and the beginning of the next chip industry cycle will occur in the first half of next year.

The market researcher predicts what it terms an upward turning point in the first half of 2006, as well as double-digit annual growth for 2006 over 2005, as revenue shipments catch up with forecasted demand. The result will be the beginning of the next IC cycle, according to the market research firm.

The factors driving the 2006 turning point are the consumption of ICs by the communications, consumer electronics, and computer industries, Advanced Forecasting said. To meet the additional demand for ICs, fab capacity utilization rates will increase, the market research firm added.

Fab utilization reached 89 percent in Q2 of this year, up from 86 percent in Q1. Foundries specifically running now at 83 percent utilization currently, significantly lower than their 99 percent level one year ago, and partially because the 35 percent additional foundry capacity that came online within the last year, according to the market researcher. The continued overall utilization increase will drive average selling prices upward and improve IC revenues, thus fueling the 2006 upswing, Advanced Forecasting said.

"Already IC units have increased 14 percent since January 2005, from 8.39 billon to 9.53 billion, which is a 24 percent increase from their 7.7 billion peak in 2000 and an 80 percent increase from the 5.3 billion minimum point of the 2001 recession," Rosa Luis, director of marketing and sales at the market research firm, said in a statement. "At the same time, IC revenues declined 2.5 percent since January 2005, forcing overall ASP to decline," she added.

"The focal point is that IC units are strong and strengthening," Luis said, based on the month-to-month growth rate which accelerated in July to 4.1 percent. The first half of 2005 is similar to the equivalent increases during the robust 1999 and 2000 years, with growth of 14 percent and 16 percent, respectively.