Global Chip Market Strengthening

New data points to a continued improvement of global chip sales, a key
indicator for the health of the tech sector.

The Semiconductor Industry Association said on Sunday that chip sales in
September increased to $14.4 billion, up from $13.6 billion in August, a
monthly jump of 6.5 percent, and a spike of more than 17 percent
year-over-year, the industry’s strongest growth since 1990.

While recent financial results from Intel Corp. and
other chipmakers have pointed to a recovery, the SIA’s quarterly leap point
to a rally in the PC market with a 33.2 percent increase in DRAM’s and an
almost 24 percent jump in microprocessor sales.

The chip industry is also deriving financial benefit to the spike in
development of more sophisticated cell phones, digital cameras and personal
digital assistants. The SIA said demand for flash memory chips was up 27
percent and digital signal processors grew by 20 percent.

“Optoelectronics were up 14.6 percent and Application Specific Standardized
Products (ASSPs) were up 17.2 percent this quarter,” according to the SIA.

The SIA said the Asia-Pacific market saw the biggest regional jump in sales
around the world. Asia grew by 19 percent, whereas Europe moved 12 percent
higher, but the Americas only rose by 8.6 percent.

Besides Intel, Advanced Micro Devices has also said sales in the latest
quarter were even better than expected. But all of the positive numbers need
to be placed in the context that the semiconductor sector has been in a
serious slump for three straight years.

“Demand in the global semiconductor market is rising briskly,” SIA President
George Scalise said in a statement issued Sunday.

“Performance is strong in all major market sectors — computation,
communications and consumer, indicating a solid, continuing and broad-based
growth cycle,” added Scalise.

“The better than expected 7.2 percent rise in GDP for the third quarter, was
driven by a combination of a record 6.6 percent increase in consumer
outlays, and strong business spending, as investment in computers and
software rose 15.4 percent, after an 8.3 percent gain in the year’s second
quarter,” Scalise said.

Intel’s CFO recently told analysts his company’s sales have seen strong
growth in the emerging markets of China, India and Russia. China has become
the world’s largest customer of wireless phone handsets and the second
largest market for PC’s.

On Sunday, Intel CEO Craig Barrett told the Swiss newspaper NZZ am Sonntag
that “in principle I am optimistic about the future. I am speaking about a
timespan of five or 10 years. But regarding the next quarter there are many
imponderables. SARS could break out again, there could be war again.”

On Wednesday, the SIA is scheduled to issue its global chip sales forecast
for 2003-2006 and will webcast its market research at 4:30 p.m. EST.

In another sign of strength in the sector, the Philadelphia Semiconductor
Index is up more than 50 percent this year.