Consumer Products Driving Chip Sales

The worldwide market for semiconductors is expected to reach record sales levels for the next several years, thanks in large part to consumer demand for smarter and more media-savvy gadgets, according to the the Semiconductor Industry Association

The SIA’s annual forecast of global semiconductor sales is projecting a compound annual growth rate of nearly 10 percent for 2005 through 2008. The new forecast projects that worldwide sales of microchips will reach $309 billion in 2008 – an increase of 45 percent from the $213 billion record level of 2004.

The new numbers look much better than a little over a year ago when the industry was dealing with a glut of supply. In September of last year the SIA reported worldwide chip sales rose to $18.2 billion in August, an increase of just 1.1 percent from the $18 billion reported in July. That was the slimmest growth margin for nearly a year.

In the current ranking of the fastest-growing major markets in 2006, the San Jose, Calif.-based trade organization listed personal computers with a forecasted unit growth of 10 percent; cellular telephones at 13 percent; digital cameras at 9 percent; digital televisions at 52 percent; and MP3 players at 52 percent.

SIA President George Scalise said although Information Technology products will continue to be the largest market sectors for semiconductors, consumer products will be the major growth-drivers in the years ahead. “Advances in microchip technology are enabling a wide array of new products that have captured the imagination of consumers. Cell phones are rapidly evolving into multi-purpose personal information and entertainment devices. Pocket-sized MP3 players are incorporating video and gaming functions.”

Scalise also said the conversion from analog to digital television is accelerating and will gain momentum over the next several years, especially now that Congress appears ready to set a date for the U.S. transition to digital broadcasting.

The SIA forecasts the microprocessor market will grow slightly faster than the PC market in 2006. Growth will be driven by a growing proportion of notebook computers, which use processors that have higher average selling prices than those used in desktop systems.

The microprocessor market was $30.5 billion in 2004. SIA projects 16.3 percent growth to $35.5 billion in 2005; 11.7 percent to $39.6 billion in 2006; 7.6 percent to $42.6 billion in 2007; and 8.3 percent to $46.1 billion in 2008.

Flash memory is expected to see 15.9 percent growth, driven largely by a 23.5 percent rise in NAND flash, which is used in products such as MP3 players and digital cameras. NOR flash is growing more slowly (6.1 percent) as cell phone manufacturers are using other types of memory devices, such as DRAMs and NAND flash.

SIA member companies comprise more than 85% of the U.S. semiconductor industry which it has represented since 1977. Collectively, the SIA says the chip industry employs a domestic workforce of 225,000 people.

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