RealTime IT News

SARS Stalls April Chip Sales

The semiconductor industry got a bad case of SARS (severe acute respiratory syndrome) last month as worldwide chip sales totaled only $12.1 billion.

The chips themselves are not sick, but the economy that surrounds it is reeling from the impact of the pneumonia-like illness in China and elsewhere.

April's sales figure is a 9.7 percent improvement over last year ($11.3 billion), it remained sequentially unchanged from the $12.1 billion in revenue reported in March, according to statistics released Friday by the Semiconductor Industry Association (SIA). The three-month moving average of sales activity is tabulated by the World Semiconductor Trade Statistics (WSTS) organization, which represents approximately 66 companies.

"Sluggish global economic growth and the Chinese SARS outbreak caused a deferral of sales in April to future months," SIA president George Scalise said in a statement. "In the U.S., an anticipated corporate PC upgrade cycle, expected to add strength to continuing consumer purchases of PCs, has again been pushed back, as executives cite continuing economic uncertainty and reduced visibility."

In the first three months of the year, the San Jose, Calif.-based SIA says global wireless sector had brisk growth, led by record numbers of new subscribers in Asia and rapid adoption of new functionality. Consumers in China, the world's fastest growing handset market, purchased 20 million handsets during the first quarter of 2003 or 6-7 million units per month.

However, handset sales and production levels in China fell in April as the spread of SARS brought shopping and consumer spending to a standstill, halting temporarily an important source of growth for the global market.

The impact of the disease has already left its mark on the IT community.

Several companies have modified travel plans, canceled conferences, and/or are dealing with infected workers. Compal, a major maker of laptops for both Dell and Hewlett-Packard , has barred employees from traveling to Hong Kong and China until the epidemic has been controlled.

Sun Microsystems postponed its SunNetwork 2003 conference in Shanghai and Intel called off its Intel Developer Forum (IDF) conferences in Taipei and Beijing.

The SIA says sales of Digital Signal Processors used in cell phones fell 9.8 percent during the month, as units fell 11.7 percent, and Flash memory grew less than 1 percent.

Among computer chips, microprocessor revenue fell by 1.3 percent in April, while DRAM revenue was off 5.1 percent. Application Specific Standard Products for wired communications grew 6 percent and optoelectronics grew 2.5 percent.

Scalise said he still stands by his original prediction that semiconductor sales would his double digit growth for all of 2003.

"There are some positive indicators in the market," Scalise said. "Leading edge capacity utilization reached 97 percent in April, essentially full capacity, and inventories are at or below target levels. Any pick-up in demand will translate directly to revenue and profit growth."

Sales in the Asia-Pacific market, the world's largest with 36 percent of total chip consumption, were up 11.6 percent year over year in April, and sales in Japan, with a 23 percent share, rose 28.9 percent. Sales in Europe, the world's third largest market with a 21 percent share, rose 9.7 percent in April, while sales in the Americas, with a reduced 20 percent market share, fell by 9.4 percent.

The SIA says the trend is due to the electronic equipment industry continuing to shift production, design services and component sourcing to facilities in Asia.