RealTime IT News

Chip Sales Continue to Grow, Albeit Slowly

No matter how you slice it, monthly, quarterly or yearly, chip sales are still growing despite economic uncertainty in the U.S. Reports from the Semiconductor Industry Association (SIA), IDC and Gartner all show that sales are holding, despite continued price attrition, thanks to overseas markets.

The SIA reported that worldwide sales of semiconductors in April were $21.2 billion, 5.9 percent higher than the $20.1 billion reported for April 2007 although flat compared to March 2008 sales.

IDC found that worldwide sales in the first quarter of 2008 (1Q08) rose 25.7 percent over 1Q07 while market revenue was up just 15.9 percent, meaning average selling prices (ASPs) are still dropping. IDC also said that the sequential growth shrank 9.2 percent from 4Q07, which is not unexpected, as that's the biggest quarter of the year.

Gartner, meanwhile, said 2008 sales are expected to rise 4.6 percent to $286.5 billion in 2008, a 4.6 percent increase from 2007 revenue of $273.9 billion, a slight increase from the 3.4 percent for 2008 it predicted in February.

One thing these estimates all have in common is the expectation that emerging markets will pick up the slack.

"Unit sales of PCs are projected to grow by around 10 percent this year, while handset unit sales are forecast to grow in the 12 percent range. Growth in these two important end-markets is increasingly driven by sales outside the United States," said SIA President George Scalise in a statement.

IDC's Q1 drop was more than the usual six to seven percent decline, and it expects 2Q08 to see a sequential decline of approximately five percent. "Processor shipments in the second quarter of a year are typically at their lowest point for the whole year," noted Shane Rau, analyst for IDC, in a separate statement. "This year, IDC's outlook is slight more conservative than in past years as economic concerns and consumer and corporate confidence remain issues."

Gartner reports that it expects low single-digit growth for the semiconductor market in 2008, but that "this has more to do with supply-side factors than weakness in demand."

Ridiculous overcapacity

That's because while the memory makers have suffered from ridiculous overcapacity leading to glut, many component makers have the opposite problem; they can't produce enough supply, according to Dean McCarron, president of Mercury Research.

"We've been coasting along only occasionally bumping our head against supply weirdness on a lot of components," he told InternetNews.com. "It's not too bad right now because we're not dealing with the volume jump like in the second half."

He said there have been shortages in pieces like power supplies and especially small LCD screens. There has been an explosion in LCD picture frames, which people can place around their house and show digital images, and they compete with the growing popularity of Eee-PC and other ultramobile devices.

These companies are more niche players and there isn't the incentive to invest in them like investors would for a memory vendor, for instance. But the mess in the memory market is also serving as a lesson.

"Ultimately, I think it's because nobody wants to end up like the memory guys," said McCarron. "They see the consequences of overcapacity." For now, those vendors are still running at full capacity, building inventory for the second half, when sales typically jump, he added.

The SIA said it will update its forecast of global semiconductor sales for 2008 through 2010 on June 11.