Secondary Processors Keep Chips Selling in Q1

After a soft February, chip sales are back on their double-digit track, according to a report released Monday by the Semiconductor Industry Association (SIA).

Overall, the chip industry is hurting from oversupply and price pressure, But the San Jose, Calif.-based trade group’s latest statistics show worldwide semiconductor sales climbed to $12.1 billion in March 2003, a 2.6 percent sequential increase from the $11.8 billion in revenue reported in February 2003.

For the first quarter of 2003, industry sales were $36.4 billion, a 3.2 percent sequential decline from the final quarter of 2002 and a 13 percent increase from the $32.19 billion in industry revenue reported in 2002’s first quarter. The three-month moving average of sales activity is tabulated by the World Semiconductor Trade Statistics (WSTS) organization, which represents approximately 66 companies.

“A number of the products that were weak in February reversed course, showing renewed demand in March,” SIA President George Scalise said in a statement. “The sequential revenue increase we recorded in March, and the 13 percent year-over-year revenue gain for the first quarter, under trying global geopolitical conditions, demonstrates once again the resilience and strength of this industry.”

But instead of central processing units like Pentiums, Athlons and the like leading the charge, the survey found secondary chips like Flash memory used in cell phones Digital Signal Processors making up for lost ground.

Among product gains in March, SIA stats show MPUs sold into computers rose by 5.9 percent, DSPs and Flash memory were up 2 percent, and Optoelectronics were up 7.7 percent.

Scalise said he was still confident about the prospects of double digit growth for 2003. The prediction, which raised a few eyebrows is based on continuing increases in consumer purchases of PCs, an anticipated corporate PC upgrade cycle later in the year, and a strong global wireless sector including The fast growing Wi-Fi sector.

“Leading edge capacity utilization remains high, reaching beyond 90 percent in March,” Scalise stated. “Assuming this level of utilization holds, we should see price stability return to the market. Inventories are slowly trending downward, as supply and demand come into a better balance.”

Much of that demand is coming from new markets overseas, according to SIA stats. Sales in the Asia-Pacific market, the world’s largest with 36 percent of total chip consumption, were up 17.2 percent year over year in March and sales in Japan, with a 23 percent share, rose 33.5 percent.

Total electronic equipment production in China is forecast to double in four years, from $130 billion in 2002 to $252 billion in 2006, while component purchases by contract manufacturers in China are forecast to triple, rising from $35 billion to $100 billion over the 2002 to 2006 period.

Sales in Europe, now the third largest market, rose by 11.3 percent in March, while sales in the Americas, with a 20 percent market share, fell by 8 percent, reflecting the migration of the electronic equipment market – including component sourcing, design services, and electronic equipment production, to Asia.

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