Trade Group Sees Chip Sales Blossoming

If the rest of the year looks like January, 2003 should be a banner year for semiconductors, according to one industry trade group.

New numbers issued Monday by Semiconductor Industry Association (SIA), global semiconductor sales totaled $12.2 billion in January 2003. That number represents a 2.4 percent decrease from the $12.5 billion in revenue reported in December 2002 but a 22 percent increase from the $10.0 billion total recorded in January 2002. The three-month moving average of sales activity is tabulated by the World Semiconductor Trade Statistics (WSTS) organization, which represents approximately 66 companies.

Despite the dip between December and January, San Jose, Calif.-based SAI says it still stands by its prediction of growth of about 21 percent to $169 billion in 2003, 22 percent to $206 billion in 2004, and flattening out at $206 billion in 2005.

“For more than a decade now, with the exception of the boom year 2000, sales have been slightly lower in January than December because of the seasonality of the semiconductor industry”, said SIA president George Scalise. “We continue to forecast double digit revenue growth for 2003 and broad-based strength in our industry, driven by a recovery in information technology spending, a fast-paced global wireless market, and the emergence of new growth sectors, including Wi-Fi and broadband networks using advanced semiconductor technologies.”

Sales in all geographic markets were down 2-3 percent in January over December, but up over January 2002, including a 33 percent rise in the Asia Pacific market, which now constitutes 36 percent of the total global chip market.

“The U.S. and China are the only briskly growing economies in the world,” Scalise said, “and China is fueling annual 8 percent growth with exports, running an historic $103 billion trade surplus with the U.S. last year.”

China’s semiconductor market is growing 18-20 percent per year, pushing it past $17 billion in 2002, from $12 billion in 2000, as China seeks to satisfy an increasing portion of its semiconductor demand internally and become a net exporter by the end of the decade.

Current market forecasts predict a 4-7 percent rise in IT spending in 2003 and a 10-14 percent rise in PC sales, as corporate buyers return to the market. The SIA predicts there is an installed base of 160-180 million older units worldwide that need to be replaced in the anticipated upgrade cycle.

Part of that need to upgrade is due to a major shift by companies migrate to new mobile technology, including smart phones offering digital cameras, e-mail messaging, wireless Internet access and video games.

The SIA report reveals the wireless communication market, 25 percent of final chip demand, drove performance in 2002.

Reflecting these seasonal demand patterns, eight out of twelve product sectors were down modestly in January from December levels, while Digital Signal Processors (DSPs) were up 3.3 percent, owing to the strength of the wireless market.

The wireless push is expected to explode this month with the release of Intel’s Centrino wireless chipset on March 12.

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