Consumers Keep Chip Sales Robust

Semiconductor sales are up again for the sixth month in a row thanks to strong demand in the consumer, computer and wireless sectors, according to a trade group report released Monday.

The Semiconductor Industry Association (SIA) said worldwide sales of semiconductors jumped 4 percent to $13.4 billion in August 2003, up from the $12.9 billion in revenue reported in July of 2003. The San Jose, Calif.-based trade group also said year-over-year sales increased 12.5 percent from August 2002 revenue of $11.93 billion.

“August sales confirm the broad-based strength of the semiconductor
market, lead by demand in the consumer, computer and wireless sectors,” SIA President George Scalise said in a statement. “This rise in end-market demand is generating stronger third quarter sales than normal seasonal
patterns.”

In August, PC related products continued to be the strongest sector with microprocessors up 7.8 percent and DRAMs up 11 percent over July. Seasonal back-to-school PC buys and the early signs of a business upgrade cycle contributed to the boost in sales this month, the trade group said. The consumer sector, which includes DVD players and digital cameras, also continued to strengthen with Consumer Application Specific Standard
Products (ASSP) up 5.3 percent and Flash up 6.9
percent over last month.

While the long-term outlook for DRAM is positive,
some analysts are concerned that memory prices will take a sharp
jump in the next month or two based on inventory build up for Christmas.

Unlike the beginning of the year, the SIA said inventory issues in the
wireless sector in Asia have been resolved and demand is once again rising
with digital signal processors (DSP) up 4.7 percent over July.

Regionally in the month of August, sales in Japan rose 1.6 percent, Asia
Pacific was up 6.4 percent, Europe up 3.8 percent, and the Americas
increased 2.5 percent over July.

“With the exception of the peak year of 2000, this is the strongest
monthly increase in August since 1990,” Scalise said.

The return to growth patterns in the chip sector is having an impact in
all markets. Recent analyst predictions suggest that 2004 will be the banner year for companies to
upgrade their PCs and servers.

Analyst firm Gartner says an unusual seasonal uptick in semiconductor demand prompted its forecast of $173 billion worth of worldwide sales in 2003. That’s an 11.2 percent
increase over 2002 when worldwide semiconductor revenue totaled $156
billion.

In June, the World Semiconductor Trade Statistics organization and
Semiconductor Industry Association (SIA) released its midyear 2003-2006 forecast,
projecting a compound annual growth rate of 9.8 percent over the forecast
period. Beyond 2003, the trade group expects worldwide sales of
semiconductors to hit 16.8 in 2004, 5.8 percent in 2005, and 7.0 percent in
2006. The SIA expects industry sales to grow from $141 billion in 2002 to
$205 billion in 2006. The majority of that growth, according to the SIA,
will be fueled by chip sales.

The three-month moving average of sales activity is tabulated by the World Semiconductor Trade Statistics (WSTS) organization, which represents approximately 66 companies.