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Tech Industry

Chip sales reach record in October, but growth keeps falling

More evidence surfaces indicating that the slowdown in semiconductor sales is continuing.

More evidence surfaced Monday indicating that the slowdown in semiconductor sales is continuing.

Worldwide sales of semiconductors reached record levels, according to an industry trade group, but the rate of sales growth continues to drop.

The Semiconductor Industry Association (SIA) said October sales increased 39 percent from October of last year to a record $18.66 billion.

In September, sales increased 45 percent from the same period a year earlier, and year-over-year sales growth was 53 percent in August.

"This confirms something we already knew," said Rick Whittington, an analyst at Banc of America Securities. "The industry is sorting itself out from the hypergrowth it experienced during the last two years."

Sales in the Japanese market grew 47 percent from a year ago. That compares with sales growth of 35 percent in the Asia-Pacific region, 42 percent in the Americas, and an increase of 33 percent in Europe.

SIA expects sales to jump 37 percent overall to more than $200 billion for the year.

Yet October sales just barely improved from the previous month. Sales inched up 1.3 percent from $18.42 billion in September, the lowest increase of the year and just below the March-to-April jump of 1.395 percent. All regions posted an increase from the previous month except the Asia-Pacific, which dipped 2 percent to $4.6 billion from $4.7 billion.

Analysts now tend to believe that sales growth is sliding. Chipmaker Altera already warned in November that sales would not meet expectations, and Xilinx said Monday after the markets closed that it would also miss forecasts for the current quarter.

"I think the (sales) growth rate has peaked," said Rick Billy, a chip analyst at SG Cowen, who added that even though investors will not see the same growth, overall sales should continue to grow until 2002.

The chip sector has experienced tough times this year. The Philadelphia semiconductor index has fallen 59 percent from its March high.

Yet Billy sees the downturn as positive. "From a long-term perspective, you can find good value in good semiconductor companies, which you couldn't say six months ago," he said.