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SIA: Chip sales to hit record, flatten

Semiconductor sales will reach $214 billion this year, a new record high. But next year will be about the same.

Michael Kanellos Staff Writer, CNET News.com
Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas.
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Michael Kanellos
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Worldwide semiconductor sales will hit an all-time high in 2004 but stay relatively flat in 2005 before climbing again over the next two years, according to the Semiconductor Industry Association.

Chip sales of $213.8 billion this year would represent a growth of 28.5 percent over worldwide sales of $166.4 billion achieved in 2003, which itself represented an 18.3 percent growth over the $140.8 billion in sales reported in 2002. The figure would also surpass the record sales mark of $204 billion set in 2000, the association said.

A year ago, the organization predicted that chip sales for 2004 would only hit $194.6 billion.

Consumer products accounted for more than half of semiconductor revenue in 2004, a proportion that is expected to grow. As a result, some of the strong growth categories included flash memory, which goes into digital cameras, and digital signal processors, which are used in cell phones.

Geographically, semiconductor sales grew by about 22 percent in North America, Europe and Japan, and by 38.3 percent in Asia. Asia is the biggest chip market, set to consume $86.9 billion chips this year. Japan is second, with $47.8 billion, but companies in both regions re-export many of the chips they buy.

Optimism aside, the association also warned that this most recent chip cycle is headed for a lull. Revenue for 2005 is expected to stay roughly flat and only grow by 6.3 percent in 2006. In 2007, sales will grow by 14.2 percent to hit $259 billion.

The SIA functions as a trade organization, lobbying the White House on issues such as tariffs in China and running a social club for Silicon Valley executives.

Other highlights of the SIA forecast include:

• The market for optoelectronics chips, used by communication specialists, will grow by 45.9 percent to $13.9 billion this year and hit $17.6 billion by 2007.

• Microprocessors will hit $30.1 billion this year, only a slight improvement over the $27.4 billion figure hit in 2003. Still, microprocessors represent one of the largest chip markets.

• The market for DRAM, memory used inside PCs, grew 61.2 percent from 2003, sailing from $16.7 billion in 2003 to $26.9 billion in 2004. Nonetheless, price fluctuations will play havoc with the market in 2005. Revenue will decline by 14.7 percent to $23 billion in 2005.

• The flash memory market will grow 34.6 percent this year, rising from $11.7 billion in 2003 to $15.8 billion in 2004. It will then decline slightly to $15.5 billion next year and hit $16 billion in 2006.