October 2, 2006 – Worldwide sales of semiconductors to a record $20.54 billion in August, thanks to surging demand for both DRAM and NAND flash memory to meet holiday purchasing projections, according to the Semiconductor Industry Association (SIA). Chip sales surged 10.5% from the same month a year ago and 2.1% sequentially, to surpass the previous record of $20.4 billion set in Nov. 2005.

SIA president George Scalise pointed to “relatively strong sales” across a broad range of products, indicating healthy end market demand. Sales growth was led by DRAMs (7.5% sequentially, 31.4% Y-Y), indicating strength in PC sales. The microprocessor segment crept up 2.1% in August vs. July, but was down 6.8% from August 2005, due to strong competition, plus an 18-month trend of rising unit sales vs. 18% decline in ASPs.

Semiconductor devices targeting consumer applications (e.g., NAND flash and ASSPs) showed strong sequential growth as chipmakers ramp up to prepare for seasonal demand, Scalise said, in a statement. He also noted that a sharp decline in gasoline prices may provide a boost to consumer confidence ¿ good news for a semiconductor industry that now derives more than 50% of sales from the consumer market. As much as 40% of the cost of devices such as cell phones, flash-based MP3 players, and digital cameras, is in the semiconductor content, he added.

Scalise also downplayed the impact of rising inventories at IC manufacturers. “Inventories have risen both at semiconductor manufacturers and in the channel in recent months, but remain in line with requirements for the holiday build season,” he said. The SIA noted that capacity utilization is still strong — ~92% in 2Q06, and expected to rise to 95% by year’s end, citing recent data from VLSI Research Inc. ¿ despite the continued transition to 300mm wafer operations, which now account for about 25% of total capacity, up from less than 15% a year ago.

By region, chip sales in the US are still on the upswing, increasing 3.6% sequentially and 18.3% year-on-year to $3.83 billion. Growth in the Asia-Pacific region has slowed somewhat but is still solid — 2.0% M-M and 10.5% Y-Y to $9.58 billion. The growth of the US has come at the expense of slower growth in Japan ($3.92 billion, +1.4% M-M/+8.8% Y-Y) and Europe ($3.21 billion, +1.3% M-M/+4.4% Y-Y).