Back-To-School A Boon for Chip Sales

It’s back to school for semiconductors as new stats published Tuesday by the Semiconductor Industry Association (SIA) show chip sales are continuing to rebound with its fifth consecutive monthly increase.

The San Jose, Calif.-based trade group said worldwide sales of semiconductors rose to $12.90 billion in July 2003, up from the $12.50 billion in revenue reported in June of 2003 and a 10.5 percent increase from July 2002 revenue of $11.68 billion.

The strongest sector seems to be PC and related products. In July, the SIA says microprocessors climbed up to 5.6 percent and DRAMs shot up 8.2 percent over June’s numbers.

“We believe this boost in sales can be attributed to the beginnings of a business upgrade cycle and the seasonal back-to-school PC buys,” the SIA said in a statement.

In addition, the trade group says the consumer sector, which includes DVDs and digital cameras, continued its recent strength with optoelectronics increasing 5.3 percent and Flash up 5.7 percent over last month.

“July’s sales reflect the continued strengthening of the semiconductor market and we believe that we will exceed our forecasted sequential growth of 5.9 percent for the third quarter,” said SIA president George Scalise. “With seasonal third quarter patterns, such as consumer builds for back-to-school and the year-end holidays, we expect sequential increases from the consumer, computation, and communications sectors.”

The glut of inventory that caused problems earlier this year also seems to have subsided, according to the SIA as the group shows capacity utilization at the leading edge has reached 94 percent.

“We believe that excess inventory in the supply chain is now negligible and in-line with normal patterns,” Scalise said.

Regionally in the month of July, sales in Japan rose 4.8 percent on a monthly basis, Asia Pacific was up 2.9 percent, Europe up 2.3 percent, and the Americas increased 1.0 percent over June.

The three-month moving average of sales activity is tabulated by the World Semiconductor Trade Statistics (WSTS) organization, which represents approximately 66 companies.

The return to growth patterns in the chip sector is having an impact in all markets. Recent analyst predictions suggest that 2004 will be the banner year for companies to upgrade their PCs and servers. Analyst firm Gartner says an unusual seasonal uptick in semiconductor demand prompted them to forecast $173 billion worth of worldwide sales in 2003. That’s an 11.2 percent increase over 2002 when worldwide semiconductor revenue totaled $156 billion.

Immediate evidence of a chip-PC rebound was the unexpected mid-quarter update from Intel . The chip making giant says it now expects third-quarter revenue to be between $7.3 billion and $7.8 billion. The company previously said its range would be between $6.9 billion to $7.5 billion.

During the company’s conference call last month, chief financial officer Andy Bryant said revenue of Intel’s microprocessors, chipsets and motherboards has been unexpectedly strong across all geographical regions and channels especially in July and the first two weeks of August.

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