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Chipmakers prepare for healthy growth
Wednesday, March 06 2002
by Matthew Clark


Despite a 1.7 percent drop in worldwide microchip sales in January, the
Semiconductor Industry Association (SIA) insists that sales will rise in 2002. 





According to the SIA, worldwide sales of semiconductors were USD10.01 billion in
January, a decrease of 1.7 percent from USD10.18 billion in December 2001. "For
the past decade, with the exception of the year 2000, sales have been slightly
lower in January because of the semiconductor industry's historical seasonality,"
stated George Scalise, SIA president. "We expect to see the industry record
slow growth for the first quarter of 2002, with sales rising to double-digit
growth in the second half of the year." 





SIA says that sales are typically sluggish in January as a result of the slowdown
in spending after Christmas purchases of PCs and consumer electronics. Of the
four major markets, Japan experienced the greatest slowdown in January with sales
off by 5.4 percent. In the Americas sales were down 0.1 percent, while in Europe
sales were down 3.1 percent. In the Asia Pacific market, now the world's largest,
semiconductor sales were on the rise, up 0.4 percent over December 2001. 





"A number of growth trends in the Asia Pacific market are positive due to
continued outsourcing to contract manufacturers located in the region," said
Scalise. "We also are encouraged by the continued rise in prices from the lows
recorded early in the fourth quarter in the DRAM market. The growth in
microprocessor sales is another indicator of the ongoing strength in the PC
market." 





Although the SIA says the market for microchips will soon improve, the figures
released on Tuesday by the organisation show just how dramatic the drop in demand
has been. Sales have fallen a staggering 40 percent over the last 12 months from
USD16.63 billion last year to USD10.01 billion in January 2002. The Americas and
Japan have taken the hardest hits with both markets off by over 50 percent in the
last year. In Europe sales are down from USD3.57 billion last year to USD2.13
billion currently, a fall of over 40 percent.  



Meanwhile, Intel, the world's biggest semiconductor maker, is set to issue its
closely watched mid-quarter update on Wednesday. While analysts do not expect the
company to change its guidance, Morgan Stanley has upgraded Intel stock from a
"strong buy" to "outperform." In its last forecast, six weeks ago, Intel
said it expected revenues to come in between USD6.4 billion and USD7 billion. The
positive outlook for the firm saw it shares rocket up USD0.85 to close at
USD32.70 on the Nasdaq on Tuesday. 



Last week the value of the chip sector was on the rise with the Philadelphia
Semiconductor Index up around 18 percent over the last past six sessions. Other
semiconductor winners on Wall Street on Tuesday included Vitesse Semiconductor,
Applied Materials, ASM Lithography and KLA Tencor. 





Advanced Micro Devices, Intel's biggest rival, was up USD0.50 on Tuesday to
USD15.74 after the company claimed it had managed to outperform other chip makers
in terms of growth, with revenue falling at half the industry rate last year.