Processor Vendors Chip Away in March, Q1

March processor sales totaled $20.3 billion worldwide, or 3.2 percent higher
than the $19.7 billion reported for March 2006, according to new tallies
from the Semiconductor Industry Association (SIA).

The March growth mirrored growth for the first quarter, when chip sales
rose 3.2 percent to notch $61 billion, or almost $2 billion greater than Q1

However, thanks to heated competition in the market for personal computers,
cell phones and other devices such as MP3 players, Q1 2007 semiconductor
sales declined 6.5 percent compared to the $65.2 billion reported for Q4

The SIA said in a statement that price pressures from intense competition in
market segments such as DRAMs , DSPs  and NAND
Flash  limited growth despite higher unit shipments for
these products.

For example, DRAM sales declined by just over 8 percent from Q4 2006 even as
units increased over 16 percent. This is due largely to average sales prices
dipping close to 20 percent over the same time period.

“Even with continued strength in unit sales of personal computers, mobile
phones, and other portable consumer electronic products, an abundant supply
of chips for these applications resulted in declining average selling prices
as manufacturers sought to hold onto market share,” said SIA President
George Scalise.

This may make sales executives for the chip and PC makers pull at their
hairlines, but it’s good news for the consumer, as Scalise noted that the
average sales price for a PC fell to $850.

By region, March chips sales in the Americas dropped 2.2 percent to $3.34
billion, yet grew 7.4 percent to $3.95 billion In Japan. Europe’s chip sales
grew 1.5 percent to $3.39 billion while Asia-Pacific dipped .04 percent to
$9.66 billion for the largest share of the $20.3 billion worldwide chip

For the year, Scalise said sales are running slightly ahead of last year’s
record level, but well short of the 10 percent growth projected in the
forecast issued by SIA last November.

He also said reports that China’s IT sector is experiencing slower growth
coupled with a U.S. GDP growth rate that fell to 1.3 percent in the first
quarter may make near-term outlooks more cautious.

SIA will update its industry forecast on June 13.

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