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    Red Herring 100: Semiconductors
    Number ten in a series of daily postings featuring concise profiles of this year's top technology companies by sector.
    By Dean Takahashi
    May 28, 2002

    Merely having survived the semiconductor slump was a major feat for most chip makers. The industry saw its revenue fall 32 percent in 2001, from $205 billion to $139 billion, making it the worst downturn ever, according to the Semiconductor Industry Association (SIA).

    Although we remain bullish on many of last year's Red Herring 100 picks, like Taiwan Semiconductor Manufacturing Company, which specializes in chip fabrication, and Applied Materials, which makes equipment for chip factories, the downturn affected their businesses so negatively that we had little choice but to exclude them from this year's list.

    Chip designers, like Nvidia, and makers of software tools for designing chips, like Magma Design Automation, fared better. These companies create compelling new products that customers want to buy.

    But chip companies face steep financial and technical challenges. Financially, the newest chip factories are likely to cost more than $2 billion. Technically, companies are still striving to make chips smaller, faster, and cheaper, but problems like verifying design, packaging the chips, and reducing heat buildup are getting more difficult to overcome. By 2005, according to the SIA, these problems could prove a brick wall to chip development. But such barriers merely give innovative companies an opportunity to knock something down.

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