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Chips are down, but slightly

Weaker chip sales in April will not influence the overall strong outlook for the year, industry group says.

A drop in memory prices and lower demand from cell phone makers pushed global chip sales down in April, the Semiconductor Industry Association reported.

Sales for the month fell to $18.2 billion, a drop of 1.2 percent from March, the industry group said. Though April is traditionally considered a strong month for semiconductor sales, the SIA said it doesn't think the dip will affect total performance for 2005.

"Despite the slight decline in April sales, the overall outlook for the semiconductor industry remains strong," SIA President George Scalise said in a statement Tuesday. "Excess inventories have been eliminated, and capacity utilization remains at reasonable levels."

"Energy prices appear to have stabilized, and U.S. economic growth--an important bellwether for the semiconductor industry--continues to be strong," he added. "On the whole, worldwide semiconductor sales continue to run ahead of our November forecast."

The group had projected that worldwide sales would stay flat compared with 2004, when sales hit $213 billion.

For much of the past year, cell phone makers were working off inventories of chips used in low-end handsets, according to the SIA. Once those inventories were exhausted and normal purchasing patterns resumed, the average selling prices for circuits for cell phones started falling, the group said.

Plentiful supplies of DRAM, the memory used inside PCs, also contributed to the price decline. There was a 7 percent drop in DRAM sales in April, from the previous month. The memory chip segment is one of the larger parts of the overall semiconductor market.