Chip sales keep climbing to record highs

May 3, 2010 – Semiconductor sales set a new high in the first months of 2010, and appear to be on their way to one of the best growth years of all time, according to new industry data and analysis.

Chip sales in 1Q10 were $69.2B according to the Semiconductor Industry Assocation (SIA), up 58% from the same quarter in 2009 (the cyclical trough); March chip sales rose 4.6% from February to $23.1B, a new high and below only record sales posted in November 2007. Sales gains in various market segments, including enterprise (which has lagged the consumer sector) as well as healthy demand in China and developing economies were cited as factors contributing to the 1Q growth.

SIA president George Scalise pointed to both "healthy demand" from major end markets as well as efforts to restock inventory to normal levels. Foundries and IDMs are ramping production to balance supplies and demand, but strong unit demand in key markets — PCs and handsets have projected 2010 growth rates of mid/high-teens and high-single-digits, respectively — are warding off any near-term fears of either excess inventories or capacity, he said.

Analyst firm IC Insights dug deeper, noting that IC shipments peaked at a record 44.5 billion units in 1Q10, surpassing the previous mark of 44.1B in 3Q08, driven by demand in PCs and cell phones, returning automotive demand, and "an overall rebound in consumer spending for electronics." Unit shipment growth had spiked to a 14% pace from 2005-2007, up from 9.5% from 2000-2004; essentially the downturn shifted IC unit shipment growth back onto that a 9.5% trendline, where IC Insights expects it to stay for the next five years.

The firm points out the "V-shaped" trend where the worst sequential quarterly IC unit growth rates (4Q08-1Q09) were immediately followed by the two best periods (2Q09-3Q09). This trend extends to the annual plane, where a lousy year in IC sales has typically been followed by an excellent year — and with 2009 pegged as the third-worst decline in IC units in three decades, projections indicate 2010 will come in 3rd over that timespan — and IC Insights sees "a good chance" that growth could top 27%, making it the No.2 year. (Perhaps worth noting the price of growth surges, though — several of those peak IC unit shipment years were again followed by a year of decline, e.g. 1980-1981, 1984-1985, 1997-1998, 2000-2001.)


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