SIA raises microchip sales forecast

The Semiconductor Industry Association (SIA) has raised its global sales growth forecast for microchips through 2007, citing …

The Semiconductor Industry Association (SIA) has raised its global sales growth forecast for microchips through 2007, citing stronger-than-expected demand for chips used in mobile phones.

In its biannual forecast, the SIA said it expected sales of microchips, which are also used in devices such as digital televisions and personal computers, to rise 9.8 per cent in 2006 to $249.6 billion (€197.3 billion), followed by an 11 per cent increase in 2007.

The SIA last November forecast sales growth of 7.9 per cent, to $245.5 billion this year, followed by an increase of 10.5 per cent in 2007.

"That [increase] is largely due to the demand that we have seen develop with cell phones," SIA president George Scalise said, adding that about one billion mobile phones would be sold worldwide this year.

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"With an average semiconductor content of $41 per unit, this segment is now second only to personal computers in terms of total chip consumption."

For 2008, the SIA said it saw global microchip sales increasing 12 per cent, compared with its November forecast of 13.9 per cent growth, and 4 per cent growth for 2009.

The higher forecasts failed to boost semiconductor shares, with one analyst saying the report did not address concerns about a rise in the inventory of products made but not yet sold to consumers. The Philadelphia Stock Exchange's semiconductor index fell 2.4 per cent.

"We have seen moderate pockets of inventory builds. . . and therefore we caution investors to use the SIA forecast for what we believe it to be, an incremental data point that is being coloured largely by the last few months of strength but doesn't necessarily tell us much about what's happening today," Stifel Nicolaus analyst Cody Acree said in a note to clients, adding that the report did reflect optimism about the industry's longer-term prospects.

Once notorious for its boom-bust cycles, the chip industry's volatility has become less pronounced as microchips make their way into a wide variety of consumer goods that are driving slower but more stable growth.

Hundreds of companies compete for a slice of the industry that makes the microprocessors that drive personal computers, the memory chips in digital music players and power management circuits for mobile phones. Major players include market leader Intel, US rival Advanced Micro Devices, South Korea's Samsung Electronics, which is the biggest producer of memory chips, and Taiwan Semiconductor Manufacturing, the world's top contract chipmaker.

The SIA said sales of flash memory found in gadgets, such as the Apple Computer iPod music player, would grow 20 per cent, to $22.3 billion, ahead of its earlier estimate of 15.9 per cent growth.

The SIA also said analog products would be one of the fastest-growing market segments, rising 17.3 per cent in 2006 to $37.4 billion, driven by wireless communications and industrial and medical applications.

In total, the association said its forecasts represented a compound annual growth rate of 9.2 per cent from 2005 through 2009, from actual sales of $227.5 billion last year to an expected $323 billion in 2009.

Separately, research firm Gartner Dataquest forecast worldwide sales of microchips to rise 10.6 per cent this year, driven by mobile phones and laptop computers.

- (Reuters)