Japan drags down '97 chip market

A weak economy continued to dampen chip sales in Japan, with semiconductor sales in 1997 slipping over six percent there even as worldwide chip sales grew four percent to $137.2 billion dollars.

Sales were up in all markets except Japan, where year-on-year results showed a sales decline from $34.18 billion to $32.08 billion, according to a report from the Semiconductor Industry Association (SIA), a trade association representing companies from 70 countries.

Year-to-year overall sales
Market	1996	1997	Percent change
Japan	34.18	32.08	-6.1
Asia/Pacific	27.55	30.18	9.6
Americas	42.68	45.85	7.4
Europe	27.56	29.09	5.5
Total	$131.97	$137.20	4.0
*figures in billions Source: SIA

Without the drag on results from the slowdown in sales to Japanese customers, the worldwide semiconductor industry would have grown by 7.5 percent.

Analysts say economic uncertainty, an ongoing oversupply of memory chips, and the devaluation of Asian currencies combined to slow sales of semiconductors across the board in December.

The SIA report reveals just how bad December was in Japan: Sales of semiconductors dropped from $2.7 billion in November 1997 to $2.5 billion in December 1997, a monthly drop of 6.9 percent. All regions showed a slowdown though, as companies moved to protect themselves from further memory chip prices drops, said an SIA spokesperson.

Results in Japan were especially dramatic when compared to the previous year. Sales were down by 9.3 percent compared to December of 1996.

In contrast, results for the Asia-Pacific market were actually up 10.5 percent for the same period, despite economic instability in a number of countries. Semiconductor sales there grew from $27.5 billion in 1996 to $30.1 billion in 1997, an increase of 9.6 percent, on the strength of results in the Chinese market.

As a result of ongoing turmoil in the memory chip market, research firm Dataquest recently lowered its preliminary forecast for the worldwide semiconductor market to $160 billion by the end of 1998. Dataquest previously had forecast that the market would reach $175 billion by year's end.