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Chip sales chill in February

Global chip revenue drops 3.3 percent from January's level, but an industry group still expects the sector to show strong performance in the second half.

Global chip sales slowed in February, with a 3.3 percent dip from January's $12.2 billion in revenue.

The Semiconductor Industry Association (SIA) on Monday also noted that the first quarter tends to be seasonally flat and said it expects demand to strengthen during the second half of the year, leading to double-digit growth for the year.

Although worldwide semiconductor sales racked up $11.8 billion in February--an 18 percent increase from sales of $10 billion in the same month a year earlier--the association noted that geopolitical uncertainties, exasperated by the U.S.-led war against Iraq, had impinged on demand for chip products.

"The recovery in the semiconductor industry that has been under way for more than 15 months appears to have stalled in February," said SIA president George Scalise. "Demand has softened in the markets that drove growth...including PCs, global wireless and consumer."

Chips used in cell phones have helped keep the industry recovery on track, with great demand from consumers who are migrating to new mobile technology, including "smart phones" that offer digital cameras, e-mail messaging, wireless Internet access and video games.

The association said 89 percent of the capacity at the leading edge is being used, but it cautioned that the "excess capacity at the trailing edge is exerting pricing pressure and impacting revenue across the market."

Sales in all markets were down sequentially from January. Sales in the American market, year-over-year, were off 4.5 percent, reflecting the continued outsourcing of the production of electronic equipment and components to Asia; but year-over-year sales in February rose 17 percent in Europe, 35 percent in Japan and 26 percent in the Asia-Pacific market.