SIA Projects Record Chip Sales In 2005

WASHINGTON — Citing stronger than expected chip sales, the Semiconductor Industry Association (SIA) on Wednesday (June 8) revised its annual forecast for global IC sales to a record $226 billion in 2005.

SIA (San Jose, Calif.) also projected an compound annual growth rate of 9.8 percent for the global industry through 2008. It added that global chip sales could grow to $309 billion by 2008.

The group originally expected flat sales for 2005.

"Higher sales have been driven by better than expected demand in a number of important end markets, including personal computers and wireless handsets," SIA President George Scalise said in a statement. "Our cautious forecast issued in November of 2004 was based on concerns that high energy prices and lingering excess inventories in a few segments of the industry would dampen sales in 2005. Those fears have not materialized, and economic growth, especially in the United States, has remained strong."

The SIA is not the only industry group now projecting a bull market for semiconductors.

Last month, the World Semiconductor Trade Statistics (WSTS) group also raised its near-term chip forecast, calling for the IC market to grow 6.3 percent to $226.5 billion in 2005, compared to a dire forecast last November of only 1.2 percent year-over-year growth.

Whether the rosier predictions of both groups-- and other analysts-- hold true remains to be seen. Recent announcements by major semiconductor suppliers continue to give mixed signals.

For instance, Texas Instruments raised its second-quarter guidance June 7, citing growing demand across its broad semiconductor line-up. But Fairchild Semiconductor lowered its second quarter guidance June 1, citing lingering distribution inventories.

In addition, the outlook for capital spending remains bleak, and companies such as ST Microelectronics NV continue to cut jobs because of lackluster results.

Though acknowledging some spot shortages and oversupply, SIA officials said during a conference call that second-half demand would improve, even in areas such as Dynamic Random Access Memory (DRAM) chips that have seen prices tumble because of excess inventory.

SIA said cellphone, PCs, digital TVs and digital cameras would help drive global chips sales for the remainder of the year.

Cellphone sales are expected to grow 13 percent in 2005, PC sales are forecast to increase by 10 percent and digital camera purchases will climb by as much as 15 percent, SIA said. Digital TV sales are predicted to soar by as much as 65 percent, contributing to the upward revision in global chip sales.

On a geographic basis, the SIA expects the Asia-Pacific region to solidify its position as the largest semiconductor market, though an SIA official said during the call growth there will eventually slow.