August 6, 2003 – Worldwide chip sales hit $37.6 billion in 2Q, up 3.2% from 1Q03, and up 10.4% from 2Q02. Semiconductor sales totaled $12.54 billion in June, up 0.4% from $12.49 billion in revenues in May 2003, according to data from the Semiconductor Industry Association (SIA). The May figures were revised downwards slightly from SIA’s earlier estimates of $12.50 billion.

Sales were up significantly in nearly every segment. Sales of programmable logic and standard cell chips increased 27.5% and 15.7% in June, respectively, due to consumer use of broadband services. Growing demand for DVDs and DVD recording capabilities drove a 33.9% jump in optoelectronics sales, while digital camera and mobile phone demand fueled a 37.1% leap in flash memory sales.

SIA president George Scalise highlighted strong growth in the computational, consumer, and communications sectors. Year-on-year sales of computers were up nearly 8% — the strongest growth in three years — contributing to an 8.2% growth in microprocessor sales.

Doug Andrey, principal industry analyst at SIA, said that an approaching PC upgrade cycle is likely the cause of the boost in computer sales, the largest market for semiconductors. “A lot of PCs were bought in anticipation of Y2K,” when the typical corporate desktop life was two years, he said. During recent economic times, businesses have been squeezing four to five years out of their aging desktop machines; at this point, it’s often cheaper to simply replace the entire PC than perform incremental upgrades. Andrey said he expects this trend to pick up by the end of 2003.

Geographically, the Asia Pacific region grew the most on a quarter-by-quarter basis, up 5.9%, followed by Japan (5.3%) and the Americas (3.6%). A 4.1% decline in European sales was attributed to a sluggish economy and continued outsourcing of production to Asia.

Capacity utilization was at approximately 88% for 0.18-micron technologies, and up to 95% for “leading-edge” 0.15-micron technologies. “Now that inventory has been worked off, increasing demand as the year progresses will directly generate rising semiconductor sales,” said Scalise.