Next PC Cycle Helping Boost Chip Sales

As an indication that the IT industry is recovering from its 2001-02 hangover, the Semiconductor Industry Association (SIA) Monday said PC sales are helping keep chip sales healthy.

For 2003’s second quarter, the San Jose, Calif.-based trade group said chip sales of $37.6 billion were up 3.2 percent from $36.4 billion in the year’s first quarter, and up 10.4 percent from the $34.1 billion recorded in the second quarter of 2002.

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

“In June, we forecast 3.2 percent growth for the second quarter and steadily increasing growth throughout the year, and that is exactly what we are seeing,” SIA president George Scalise said in a statement. “As predicted, the recovery is broad-based, and now is beginning to draw strength from computation, the largest end market for semiconductors, as well as the global consumer and communications sectors.”

The trade group cited computer sales as one of the main stimulus for the aggressive amounts of chips being sold. During the quarter ending in June, sales of computers rose almost 8 percent on a unit basis year-over-year, the strongest growth since 2002, supporting an 8.2 percent growth in microprocessors.

The numbers suggest that PC vendors are building up their stockpiles for the next major buying cycle. Recent analyst predictions suggest that 2004 will be the banner year for companies to upgrade their PCs and servers.

In the wireline sector, the SIA said strong consumer demand for broadband services such as DSL and cable products contributed to a 15.7 percent year-over-year increase in standard cells and a 27.1 percent increase in programmable logic devices. In the consumer space, brisk sales of DVD’s and digital cameras produced an increase of 33.9 percent in optoelectronics, while flash memory used in these products and mobile phones was up 37.1 percent year-over-year.

The trade group said past problems with excess inventory seem to have corrected themselves with very few exceptions.

“Now that inventory has been worked off, increasing demand as the year progresses will directly generate rising semiconductor sales,” Scalise said.

Regionally, Asia Pacific maintained its top spot with a 5.9 percent increase in sales for the June quarter. Japan rose 5.3 percent on a quarter-over-quarter basis and the Americas retook the number three spot at 3.6 percent. Sales in Europe declined by 4.1 percent due to sluggish economic growth in Europe and outsourcing of production to Asia, according to the trade group.

For its 2003-2006 midyear forecast, the SIA said it projects 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.

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