Semiconductor Sales Spike in November

The Semiconductor Industry Association (SIA) on Tuesday reported a surprising spike in November semiconductor sales, not surprising given the impending holidays. What makes it unusual is that the spike came so close to the gift giving season.

Global sales of semiconductors reached $22.7 billion in November, an increase of 11.3 percent from the $20.4 billion in November 2005 and up 3.1 percent from the $22.0 billion reported in October 2006.

This would be expected, as it was the holiday gift giving season and consumer electronics giant Best Buy was among the most aggressive advertisers this year. With iPod-mania in full swing, three new videogame consoles and a new operating system with high system requirements on the way, consumer electronics were a more popular gift option than a sweater.

It used to be that September was the strongest month of the year for sales in anticipation of Christmas, according to Dean McCarron, semiconductor analyst with Mercury Research. Then it slid into October. Now it’s moving into November.

“What is basically happened over the past few years is the manufacturing pipeline has tightened up a lot,” he told internetnews.com. “So we may be seeing that manufacturing is taking place much closer to the time of the sale.”

Thanks to improvements in manufacturing and shipment, chips can go from assembly to being in a completed product on the shelves in as little as four weeks, said McCarron.

Consumer electronics is certainly driving the need for chips. The Consumer Electronics Association (CEA) has said unit sales of consumer electronic products such as flat-panel displays and digital cameras were ahead of initial forecasts for the holiday season.

The CEA reported that November unit sales of digital cameras in the U.S. market were up 30 percent over November 2005 and up over 40 percent for the first 11 months of 2006.

Semiconductors, including Digital Signal Processors (DSPs)  were up 12.3 percent while DRAMs  were up 6.8 percent and NAND flash  memory up 6.3 percent. Bringing up the rear was microprocessors, up 4.3 percent.

The numbers in the report reflect the appropriate strength of markets, said McCarron. DSPs are used in cell phones and some media boxes, including the iPod. Overall, he said, the numbers are better than usual but nothing exceptional.

“Overall, the scale of growth being as strong as it was is the main surprise. It’s not obscenely high, just better than people had been expecting,” he said.