SIA Sees Strong Chip Sales Ahead

The Semiconductor Industry Association (SIA) is seeing no signs of weakness in the global chip market, despite some recent setbacks from manufacturing accidents and plunging prices. And, so far, the trend toward virtualization isn’t having much of an impact, either.

The trade association estimates worldwide sales will surpass $321 billion in 2010 with a compound annual growth rate of 7.7 percent each year through 2010. For 2007, the SIA projects global sales of $257.1 billion, an increase of 3.8 percent from last year’s sales of $247.7 billion.

The main driver for this growth is not an increase in corporate IT spending, which is predicted to slow considerably, but the continued growth in the consumer market. It won’t be CompTIA and CDW that drive sales, it will be Best Buy.

“The consumer has taken on a predominant position in our demand,” Anne Craib, director of market research and international affairs for the SIA told “If you look right now, consumer has risen to 20 percent of total demand. If you look at computer forecast, 40 percent of that market is now purchased by consumers. That’s a big shift.”

However, IT is doing well, despite a little fretting by Intel CEO Paul Otellini at OpenWorld earlier this week that server consolidation might be bad for his business.

“We are not seeing an impact of virtualization,” said Craib. “We’re seeing fairly robust demand in the PC sector. That is the underpinning of a lot of the forecast. The computer area, laptop, desktop and servers, is 40 percent of the market.”

The SIA expects PC sales, and sales of all the chips inside them, to grow between 11 percent and 12 percent this year and through 2008.

There had been some concern of an economic slowdown in the U.S., especially with oil approaching $100 per barrel. But then Wal-Mart on Tuesday predicted strong sales for the upcoming Christmas shopping season, reassuring investors and sending the Dow Jones Industrial Average up 320 points in one day.

Like most market analyses, the SIA forecast predicts that the emerging markets of Asia, Eastern Europe/Russia and South America will be the principal drivers of growth for the next several years.

“There are tens of millions of new consumers in Eastern Europe, China, South America and India. There’s a whole new market of consumers and they are buying all kinds of products—and they will continue buying,” added John Greenagel, director of marketing for the SIA.

The largest growth areas will be digital TVs (50 percent), MP3 and music players (20 percent) and cellular handsets (12 percent). Among the semis, flash memory will experience the strongest growth, up 20 percent by 2010, despite a glut in the market.

DRAM is only expected to rise 1.5 percent, the slowest growth of the group, due to so much downward price pressure, said Craib.

Asia-Pacific will continue to be the fastest-growing regional market, growing from 48.4 percent in 2007 to 51.1 percent in 2010.

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