October 1, 2004 – Worldwide sales of semiconductors grew to $18.2 billion in August, an increase of 1.1% from the $18.0 billion reported in July, the Semiconductor Industry Association (SIA) reported today. Sales increased by 34.2% from the $13.6 billion reported in August 2003. The SIA noted that chip sales were in line with historical patterns for August.

“Semiconductor producers and their customers have reacted with unprecedented speed to recent reports of excess chip inventories,” said SIA president George Scalise. “In previous market cycles, it has generally taken several quarters for the supply chain to take corrective action. When the first reports of excess inventory accumulation surfaced in the second quarter, both producers and customers moved quickly to adjust. Both VLSI Research and iSuppli are now reporting that chip inventories are declining.”

SIA will release its 2005 industry forecast on November 3.

The SIA noted that sales of personal computers and equipment for networking and telecommunications contributed to semiconductor sales growth in August. Sales of microprocessors increased by 3.5% sequentially, reflecting PC sales patterns of the back-to-school season.

Chip sales were up modestly in all geographic regions. In the Asia-Pacific region, however, sales increased by only 0.1% sequentially, reflecting the impact of inventory adjustment actions taken by manufacturers of electronic products.

“As we would expect with corrective action under way, factory utilization has declined slightly as manufacturers are starting fewer wafers. Factory utilization reached 95% in the second quarter, with leading-edge and foundry capacity running at 99%. We expect a modest decline in capacity utilization rates in the current quarter,” said Scalise. “Capital spending has been running at around 23% of sales, which is in line with historical patterns. At this time, we do not believe overcapacity will be a major concern in 2005.”