Chip Sales Slump in 2004

Global semiconductor revenue is on track to post a lower-than-expected gain in 2004, following a sudden downturn during the closing months of the year, according to Gartner.

Worldwide chip sales are expected to reach $218 billion this year, an increase of 23 percent from 2003, Gartner says in a statement. That figure is $8 billion lower than the market analyst's previous estimate of $226 billion announced in August.

The sudden downturn at the end of the year was caused by chip makers responding to an incremental build-up in channel inventory, Gartner says. In an effort to avoid the semiconductor crash that occurred in 2001, chip makers this time reacted quickly and cut back production, it says.

Carrying Over

The slowdown in semiconductor sales is widely expected to carry over into next year.

For example, World Semiconductor Trade Statistics (WSTS), an industry group that tracks global chip sales, predicted in November that global semiconductor sales in 2005 would total $215.3 billion, up 1.2 percent from the group's 2004 sales estimate of $212.8 billion. That is sharply lower than the 27.8 percent increase in chip sales that WSTS predicted for this year.

For its part, Gartner predicted in August that global semiconductor revenue would grow by 5 percent to 10 percent in 2005. The company did not offer an updated projection for next year with the figures it released this week.

Looking back over 2004, Gartner notes that Asia-Pacific semiconductor sales showed the greatest growth, with revenue rising 34.6 percent over the previous year. Revenue from Europe, the Middle East and Africa (EMEA) grew by 19.8 percent, outpacing growth in the Americas (16 percent) and Japan (14.6 percent).

Intel holds onto its spot as the world's largest chip maker with 2004 revenue expected to reach $30.5 billion, a 13.7 percent gain over last year, Gartner says. Trailing Intel in the number-two spot is Samsung Electronics, with projected 2004 semiconductor revenue of $15.6 billion, up 7 percent from last year.

The two biggest gainers this year were Texas Instruments, which moved into the number three spot from number four last year, and Infineon Technologies, which moved up to number four from number seven, Gartner says. The growth allowed Infineon to overtake STMicroelectronics as Europe's biggest chip maker, Gartner says.