Market analysis and forecasting has been a bit like medical research lately. Aspirin is good one year, bad the next. The latest "credible" study says egg yolk may not be bad after all, in contrast to previous "credible" studies.

The time for looking back at 2006 and anticipating what 2007 holds is here again. And while we will continue to report forecast corrections from analysts at the end of each quarter, the overall trends are clear.

The U.S.-based Semiconductor Industry Association (SIA) in its annual forecast of global semiconductor sales has projected that the industry will grow to $321 billion in 2009. The association forecast late November a CAGR of 9 percent over 2006-2009. Global IC sales should reach $248.8 billion by year's end, up from $227.5 billion in the last for a 9.4 percent growth rate. The Asia-Pacific region is expected to grow the fastest and account for over 48 percent of the worldwide market in 2009.

The SIA in November stated that consumers will continue to drive semiconductor demand, something that everyone seems to have agreed on since late 2005. There is the usual talk about digital cameras, MP3 players, DTVs and, of course, the ubiquitous cellphones, which have been getting "smarter" for some time now and have been challenging PDAs that have encased cellular connectivity.

I see three clear trends:

1. Convergence—We're all familiar with this, and it's perhaps most apparent in the smart cellphone with digital camera. Smart phone unit sales almost tripled from 2004 to 2005, according to market researcher In-Stat, and increased by 50 percent during the first half of 2006 over 2005. The firm expects 18.8 million smart phones to be sold in the Asia-Pacific region this year, about double those sold in 2005.
2. Connectivity—If devices won't converge, they'll connect. With the 802.11n around the corner, uptake into applications like DTVs—a segment expected to grow rapidly—is expected to finally bring Wi-Fi into the living room.
3. Storage—The two trends above enable data creation and exchange, and feed the need for cheap storage. Enter flash, mobile DRAM, micro HDDs and hybrid HDDs. Application environments like the Windows Vista will serve as catalysts to drive up demand.

The second is the back-to-basics approach. With rural markets opening up in China, India and Vietnam, bare-bone handsets for less than $45 are helping introduce those folks to wireless technology. This is the high-volume, low-margin market that is nevertheless driving innovations like single-chip.

Here's one forecast that won't be revised middle of 2007: Whatever approach the market takes next year, there is bound to be plenty of room for engineering innovation from you. And I for one look forward to it.

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