Chip Sales Forecast Is Bright

The global semiconductor industry is set to enjoy three years of stable sales growth to reach $309 billion by the end of 2008, the Semiconductor Industry Association says.

The group, a U.S.-based industry association for chip makers, also revised its 2005 sales forecast to 6.8 percent year-on-year sales growth to $227.6 billion, up from an earlier forecast calling for just 6 percent growth this year. Last year, chip sales reached a record high $213 billion.

Big Growth: Gadgets

The bullish forecasts indicate the group sees steady technology industry growth in coming years, since semiconductors power the world's digital devices. Consumer products such as MP3 players, multipurpose mobile phones and digital entertainment devices for the home will remain the major growth drivers for chip sales over the next few years, but information technology equipment will continue to be the largest end market, the SIA said.

The group said major end markets such as PCs will likely grow by 10 percent next year, with mobile phone sales increasing 13 percent. But consumer devices such as digital televisions and MP3 players will outpace older products, with forecast growth of 52 percent in each category, according to the SIA.

The Asia-Pacific region will lead chip industry sales growth in coming years, with 16.4 percent year-on-year growth to $103.3 billion this year followed by 11.4 percent growth to $115.1 billion next year and $150.4 billion in 2008, the SIA predicted.

Japan will be the biggest laggard this year, with a projected 2.6 percent drop in chip sales to $44.6 billion, followed by Europe, with a slow 0.1 percent increase in chip sales to $39.5 billion, according to SIA figures. The group forecast Japan will bounce back next year with 5.2 percent growth, while Europe will gain 4.9 percent.

Most Popular Chips

Digital signal processors, or DSPs, which are used in communications devices, are projected to post the sharpest growth among chip segments next year due to strong cell phone sales, the transition to third generation (3G) mobile phones, and new uses for DSP chips in consumer products like high-definition camcorders, according to the SIA report. The group forecasts DSP sales will rise 17.2 percent to $9.1 billion next year, after remaining flat this year.

Flash memory will also remain a hot item next year led by strong growth in NAND flash, which is used mainly for its storage capacity in MP3 players, digital cameras, and other consumer electronics devices. The other main kind of flash, the NOR used to access and run software in mobile phones, is growing more slowly, according to the SIA. Next year, flash memory sales will rise 15.9 percent to $21 billion, after a strong 2005 when flash grew 16.1 percent, the SIA said. NAND sales will grow 23.5 percent next year, followed NOR's slower 6.1 percent increase.

DRAM memory chips will suffer the most next year, with a drop of 10.1 percent in global sales to $23 billion, after a 4.8 percent decline this year to $25.6 billion, according to the SIA.