May 1, 2006 – Strong sales of cell phones drove higher demand for microchip sales, pushing overall semiconductor sales in 1Q06 to a 7.3% increase from a year ago, according to the Semiconductor Industry Association (SIA).
Worldwide sales of semiconductors were $59.1 billion in 1Q06, vs. $55.1 billion in 1Q05, but down 1.3% from 4Q05, following normal seasonal patterns. Sales in March were $19.7 billion, a 2.3% increase month-on-month and up 7.3% year-on-year.
Cell phone unit sales soared 31% from a year ago, well outpacing expectations due to shorter replacement cycles and robust demand in China. Unit sales are expected to top one billion this year, with an average semiconductor content of approximately $41 per unit, according to recent data from iSuppli. Cell phones are now the second largest market after PCs, together accounting for more than half of all semiconductor sales.
Chinese demand for cell phones is staggering — the nation has approximately 410 million cell phone subscribers right now, and is adding new subscribers at a rate of about five million per month, mainly for high-end phones with increased functionality, stated George Scalise, SIA president. He also noted that the replacement cycle for all cell phones has declined to about 18 months from 26 months, due to smaller form factors and increased functionality.
Microprocessor sales rose 6.8% year-on-year in 1Q06 to $8.83 billion, due to a 13% hike in unit sales of PCs. Competition among PC manufacturers led to reduced prices for more powerful systems, with price declines outpacing the historic 10%/year benchmark, Scalise noted.
Inventories are on the rise as manufacturers stockpile ahead of expected market growth, and this situation should be monitored, particularly for market segments involving consumer products, Scalise pointed out — a segment that’s being especially pinched as energy prices continue to rise. He estimated that rising gas prices will take approximately $138 billion out of American households’ discretionary income this year, which could affect consumer confidence and spending on electronics that incorporate semiconductors. Still, for now, overall end market demand remains generally strong, and capacity utilization rates remain well above 90%, he said.
Month-to-month sales (US $B)
Market February March % change
Americas 3.72 3.73 0.4%
Europe 3.11 3.24 4.1%
Japan 3.64 3.79 4.0%
Asia Pacific 8.79 8.94 1.7%
Total 19.26 19.70 2.3%
Year-to-year sales (US $B)
Market March ’05 March ’06 % change
Americas 3.25 3.73 14.9%
Europe 3.37 3.24 -4.0%
Japan 3.83 3.79 -1.1%
Asia Pacific 7.91 8.94 13.0%
Total 18.36 19.70 7.3%
Three-month-moving average sales (US $B)
Market Oct/Nov/Dec Jan/Feb/Mar % change
Americas 3.71 3.73 0.6%
Europe 3.32 3.24 -2.3%
Japan 3.62 3.79 4.7%
Asia Pacific 9.31 8.94 -4.0%
Total 19.95 19.70 -1.3%