SANTA CLARA, CA, June 17 -- The semiconductor industry has hit the sweet spot in 2004, with supply and demand forces aligning to generate strong growth, but not the kind of overheated expansion that led to the severe market downturn in 2001, iSuppli Corp. said today.

The m arket research firm upped its 2004 worldwide semiconductor revenue forecast to $226.5 billion in 2004, up 24.4% from $182 billion in 2003. iSuppli's previous forecast, released in April, predicted 19.8% growth.

The market growth will slow in 2005 to an 11.8% gain (total sales: $253.3 billion) and will be virtually flat in 2006, with growth of 0.1%, iSuppli predicts. Sales will rise 9.2% in 2007, the firm says.

"All application markets for semiconductors are back in positive territory in 2004 and all the regions will experience growth this year," said Gary Grandbois, principal analyst, linear and power management for iSuppli. "Compared to 2000, this cycle is much more moderate and much more balanced. In the future, we'll look back at 2004 and say, Those were the good old days."

On the demand side, iSuppli predicts all major electronic equipment application markets will experience growth in 2004, driving broad semiconductor demand. This is the first time this has occurred since 1999. With the long-suffering wireless communications area finally returning to growth in 2004, overall electronic equipment revenue will reach $1.16 trillion in 2004, up 10%, iSuppli predicts.

iSuppli is not detecting an undue buildup of semiconductor inventory along the supply chain, indicating that the present increase in sales is based upon real demand.

Furthermore, while global semiconductor capacity utilization rates are rising, they are not high enough to trigger broad increases in factory semiconductor prices. The addition of new capacity eventually will drive down utilization rates and semiconductor prices, contributing to a pause in chip industry revenue growth in 2006, iSuppli predicts. However, iSuppli does not believe there will be enough additional semiconductor manufacturing to trigger an overcapacity-generated crash, as was seen in 2001.

Semiconductor growth in 2004 will be stronger in the second half than the first. Chip revenue will rise to $119 billion in the second half, up 10.7% from $107.5 billion in the first half, the firm says.