April 30, 2007 – Pricing woes continued in March across major markets in the semiconductor industry, which all saw sales decline despite higher unit shipments, according to the SIA’s latest monthly data. Overall chip sales managed to inch up in March and 1Q07, but are still well below expectations.

Global semiconductor sales (based on a 3-month moving average) rose 1% from February to $20.34 billion, representing a 3.2% increase from March 2006. Sales in the US continued to decline (-2.2% to $3.34 billion) while the Asia-Pacific region held mostly flat (-0.4% to $9.66 billion), while sales in Japan picked up due to the fiscal year’s end (+7.4% to $3.95 billion). Comparing year-on-year numbers, chip sales in the US declined by double-digits (-10.6%), while other regions showed small single-digit growth, led by the Asia-Pacific region with ~8% growth Y-Y.

Looking at actual numbers (no 3-month average), the March increase was significant — +31.8% in overall chip sales vs. February to $23.73 billion, with growth in Europe (24.8%) and the Americas (26%) trailing that of the Asia-Pacific (36.9%) and Japan (30.5%). Year-on-year, though, chip sales were up just 2.7%, as the Americas saw sales drop 11.2%, balanced by growth in Japan (10.8%) and the Asia-Pacific (5.8%).

Preliminary data for 1Q07 shows a 6.5% decline overall from 4Q06 to $61.02 billion, and 3.2% better than 1Q06. That’s well below the 10% growth that the SIA had predicted last November for 1Q07, and the group will likely reflect that new reality in its updated forecast in mid-June.

SIA president George Scalise noted that pricing pressures in major market segments including DRAM, DSP, and NAND flash all outweighed higher unit shipments. DRAM sales, for example, were down ~8% Q-Q, as 16% higher unit shipments were offset by ~20% ASP decline. Microprocessors also declined (nearly 13%), as unit sales declined while ASPs remained unchanged. Inventory pileups also were being addressed in 1Q, which added to the lower ASPs, Scalise noted, adding that all these factors spell great deals for consumers — a consumer PC now costs around $850, he pointed out.

“Despite recent signs of slowing growth in the overall economy, consumer spending on electronic products appears to have held up fairly well,” said Scalise, in a statement. He noted that another rise in gas prices seems to have not had an impact yet, but slower growth in China’s IT sector and recent numbers suggesting lower US GDP are points of concern to consider for the semiconductor industry’s near-term outlook.