Chip sales slipping, following consumer concerns

Oct. 30, 2008 – Thanks to the global economic shakiness, the SIA’s forecast of ~4.5% growth for 2008 is in jeopardy.

Chip sales in September inched up 1.1% to $23B, slowing from August’s 2.4% month/month increase, and were up just 1.6% from September 2007 (vs. 5.5% Y/Y last month). Through the first nine months of 2008, chip sales total $196.4B, about 4% higher than the same period a year ago. Excluding the still-suffering memory segment, chip sales rose 7.8% Y/Y in September, also slower than August’s 11.4% nonmemory growth.

Geographically, all regions lost ground compared with August’s Y/Y comparisons, led by North America where the Y/Y decline more than doubled (see chart below). The rolling three-month average actually improved overall, but that was solely due to a surge in Japan which completed its fiscal half-year, more than making up for continued slumps in North America.

The semiconductor industry now appears to be feeling the effects of world financial market turmoil, with near-term uncertainty weighed by “a steep decline in consumer confidence and caution in the enterprise market,” noted SIA president George Scalise, in a statement. He pointed to several ominous signs, including a 20-point drop in the Consumer Confidence Index to a new low. “Restoring consumer confidence is key to growing semiconductor sales going forward.”

Emerging markets remain a somewhat bright spot, though, he claimed, with sales of PCs and cell phones remaining strong in these regions, which are still enjoying mid- to high single-digit economic growth. Developing countries now account for nearly half of all unit sales of PCs, the SIA noted, and will account for nearly 70% of all cell phone unit sales this year.

Other semiconductor-demand apps remain promising, including MP3/PMP devices and LCD TVs, said the SIA, noting iSuppli projections of 11% and 33% growth, respectively, vs. ~5% growth for overall consumer electronics.


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