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Processor Vendors Chip Away in March, Q1

March processor sales totaled $20.3 billion worldwide, or 3.2 percent higher than the $19.7 billion reported for March 2006, according to new tallies from the Semiconductor Industry Association (SIA).

The March growth mirrored growth for the first quarter, when chip sales rose 3.2 percent to notch $61 billion, or almost $2 billion greater than Q1 2006.

However, thanks to heated competition in the market for personal computers, cell phones and other devices such as MP3 players, Q1 2007 semiconductor sales declined 6.5 percent compared to the $65.2 billion reported for Q4 2006.

The SIA said in a statement that price pressures from intense competition in market segments such as DRAMs , DSPs  and NAND Flash  limited growth despite higher unit shipments for these products.

For example, DRAM sales declined by just over 8 percent from Q4 2006 even as units increased over 16 percent. This is due largely to average sales prices dipping close to 20 percent over the same time period.

"Even with continued strength in unit sales of personal computers, mobile phones, and other portable consumer electronic products, an abundant supply of chips for these applications resulted in declining average selling prices as manufacturers sought to hold onto market share," said SIA President George Scalise.

This may make sales executives for the chip and PC makers pull at their hairlines, but it's good news for the consumer, as Scalise noted that the average sales price for a PC fell to $850.

By region, March chips sales in the Americas dropped 2.2 percent to $3.34 billion, yet grew 7.4 percent to $3.95 billion In Japan. Europe's chip sales grew 1.5 percent to $3.39 billion while Asia-Pacific dipped .04 percent to $9.66 billion for the largest share of the $20.3 billion worldwide chip tally.

For the year, Scalise said sales are running slightly ahead of last year's record level, but well short of the 10 percent growth projected in the forecast issued by SIA last November.

He also said reports that China's IT sector is experiencing slower growth coupled with a U.S. GDP growth rate that fell to 1.3 percent in the first quarter may make near-term outlooks more cautious.

SIA will update its industry forecast on June 13.



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