Chip sales hit record in 2005

Strong demand for consumer electronics and PCs drove up worldwide chip sales 6.8 percent in 2005.

Driven by strong demand for consumer electronics and PCs, worldwide chip sales increased 6.8 per cent to a record $US227.5 billion in 2005 from $US213.0 billion in 2004, according to the Semiconductor Industry Association (SIA), in San Jose, California.

Chip sales for December 2005 increased 8.6 per cent to $US19.95 billion from the same year-ago period, the SIA said Thursday. Similarly, sales for the fourth quarter of 2005 also jumped 8.6 per cent to $US59.86 billion from the same year-ago period and were up 2 per cent from third-quarter figures.

Global chip sales for December did dip 2.2 per cent from November, but this trend is consistent with seasonal fluctuations leading up to the holiday shopping season, according to the SIA.

It's hard to tell whether rising energy prices would take a toll on semiconductor sales in the coming year, SIA president, George Scalise, said. But he was optimistic because surging energy costs and the natural disasters in the past year didn't appear to negatively affect the industry.

The SIA predicts worldwide chip sales will increase 7.9 per cent in 2006 to $US245 billion and will reach $US309 billion in 2008, driven in part by strong demand for digital signal processors and flash memory used in consumer electronic devices. Dynamic RAM memory chips, however, are expected to slightly decline.

Despite the bullish forecast from the SIA, bellwether chipmaker Intel recently reported worse-than-expected revenue for its 2005 fourth quarter as a result of desktop chip inventory problems. Intel's revenue of $US10.2 billion for the quarter missed its expectations of between $US10.4 billion and $US10.6 billion. Revenue was still up 6 per cent from the same year-ago period, and Intel expects inventory levels to stabilise in 2006. Advanced Micro Devices, meanwhile, beat expectations for the fourth quarter of 2005. The chipmaker's revenue rose 45 per cent to $US1.84 billion from the same year-ago quarter. Net profit for the quarter was $US96 million.

The SIA's figures also reflect the continuing migration of electronics manufacturing to the Asia-Pacific region. Semiconductor sales in that region skyrocketed 20 per cent to $US9.3 billion in December of 2005 from the same year-ago period. The region accounted for nearly 50 per cent of the global market for microchips in 2005, with China taking the lion's share.

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Shelley Solheim

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