Flash Demand Keeps Semiconductor Market Growing

The semiconductor industry still has some gas in the tank despite price wars, an abundance of supply and new products shipping this fall. The Semiconductor Industry Association (SIA) reported that sales for the month of July rose to $20.6 billion, an increase of 2.2 percent over July 2006 and an increase of 3.2 percent from June 2007.

Growth was mainly attributable to increases in sales of microprocessors, MOS logic devices and NAND flash memory products in particular. Flash continues to be a hot seller for everything from cell phones to USB thumb drives to iPods.

“Demand was exceptionally high,” noted George Scalise, president of the SIA. “Normally we look at bit demand at 50 percent but in this past year it’s been at close to 80 or 90 percent.” That means instead of a 50 percent increase in data capacity for products sold, it went up to between 80 and 90 percent. It means 512MB and 1GB flash drives are giving way to 2GB and 4GB drives.

Scalise said the industry went through “an inordinate price attrition in the first five months of the year,” which has only recently begun to subside. This was due to the excess capacity that was producing even more than was needed in the face of unprecedented demand.

NAND flash memory is still up 25 percent in terms of revenue over the same period last year, while MOS logic excluding microprocessors – MOS stands for metal-oxide semiconductors – was up 27 percent. Microprocessor sales grew five percent over last year.

Asia Pacific continues to be the largest market, accounting for almost half of the sales in July. APAC represented $9.87 billion of the $20 billion pie while the U.S. accounted for $3.47 billion in sales. Europe checked in at $3.28 billion and Japan tallied $3.96 billion in sales.

All of that change has happened in the last five years, said Scalise. “It used to be the U.S. was 40 percent of the market, Japan was 20 percent, Europe was 20 percent and Asia Pacific was 20 percent. In the last five years, those numbers with the U.S. and APAC reversed. Now Asia-Pacific is 50 percent and the U.S. is 20 percent.”

The SIA still expects overall semiconductor sales growth for 2007 to increase two percent from 2006.

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