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Chip sales show signs of life

The semiconductor industry continued its modest recovery in June, but PCs played only a small role, according to a new report.

Semiconductor sales continued to grow steadily in June, with a fourth consecutive month of growth, according to a new report. It's good news for those seeking signs of an information technology industry recovery.

Worldwide sales reached $12.54 billion in June, in line with the forecasts of the Semiconductor Industry Association (SIA), which published the report. That tally was up from May's $12.49 billion, led by growth in Japan and the Asia Pacific region, the SIA said on Monday.

In the second quarter, sales of semiconductors totaled $37.6 billion, up 3.2 percent from the first quarter's $36.4 billion and a 10.4 percent rise from the second quarter of last year.

IT hardware sales have suffered through a prolonged downturn since the explosive growth of the late 1990s, with many PC sellers predicting that sales will stick to growth rates in the single digits for the foreseeable future.

PCs showed relatively sluggish growth for the second quarter, showing a rise of just under 8 percent compared with the same quarter of 2002, which supported 8.2 percent growth for microprocessors. Other sectors grew much more quickly year-over-year, with demand for broadband services sparking a 27.1 percent increase in the programmable logic devices used in DSL (digital subscriber line) and cable modem products. Optoelectronics grew 33.9 percent from strong sales of optical consumer devices such as DVD players and digital cameras, while flash memory, typically used in consumer electronics and mobile phones, was up 37.1 percent year over year.

Europe did not take part in the rising sales, with sales down sequentially 4.1 percent for the second quarter, the result of slow economic growth and outsourcing to Asia, the SIA said. In Japan, sales grew 5.3 percent quarter-on-quarter, Asia Pacific sales rose 5.9 percent, and sales in the Americas were up 3.6 percent.

In another positive sign, the SIA said that vendors have reduced excess inventory in the supply chain, and now hold stocks at low levels.

"Now that inventory has been worked off, increasing demand as the year progresses will directly generate rising semiconductor sales," said SIA President George Scalise in a statement.

The group is projecting growth of 10.1 percent for this year, 16.8 percent for 2004, 5.8 percent in 2005 and 7 percent in 2006. The SIA said it expects industry sales to grow from $141 billion last year to $205 billion in 2006.

The SIA uses a three-month moving average to account for differences in companies' financial reporting calendars when compiling its monthly figures.

ZDNet UK's Matthew Broersma reported from London. CNET News.com's John Spooner contributed to this report.