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Chip slump continuing

Global sales continued their slump in June, slipping over 14 percent from a year ago, but hard drives may have bottomed out.

Global semiconductor sales continued their slump in June, slipping over 14 percent from the same period a year ago as regionalized economic disruptions continued to drag down worldwide revenues.

Chip sales totaled $9.84 billion, which represents a decline of 2.2 percent from May, according to figures newly released by the San Jose, California-based Semiconductor Industry Association, (SIA). The consequences of Asia's economic slowdown and a worldwide glut of memory chips were again named by the SIA as the primary culprits in the downturn.

In June, the effects seemed to largely be confined to the Asian markets, which registered a 3.7 percent decline from the month prior. In the North and South American market, sales declined a modest three-tenths of a percent, compared to a double digit drop-off from April to May. Japan showed the largest decline on a yearly basis, with sales off 25.7 percent to $2.05 billion. Currency devaluation continued to depress revenue.

Despite the continued gloom, some industry officials say they are seeing signs that the sales slump is tapering off.

"We are optimistic that we are bottoming out in this particular semiconductor slump," said Hector Ruiz, president of Motorola's Semiconductor Products Sector, at a financial analyst meeting yesterday. Ruiz said that the company looks at a number of variables, like commodity prices, to predict the outlook for semiconductors and that it has seen less volatility than earlier in the year.

The market for hard disk drives has also been beset by similar problems of oversupply and sluggish computer sales, but some analysts see early indications that market may be stabilizing as well.

The overall rigid disk drive market is forecast to grow 12.5 percent in volume to 144.9 million drives in 1998, said Dennis Waid, president of Peripheral Research. Waid made his remarks at an industry confab in Singapore, according to a report in the online edition of the Nikkei Business Publications.

Earlier forecasts showed more robust growth rates of 17 percent for the year, but the third quarter of 1998 should show signs of improvement, Waid said.

Reuters contributed to this report.