Global Chip Market Strengthening

Data points to a continued improvement of global chip sales, a key indicator for the health of the tech sector.

The Semiconductor Industry Association (SIA) said that chip sales in September 2003 increased to $14.4 billion, up from $13.6 billion in August, a monthly jump of 6.5 percent, and a spike of more than 17 percent year-over-year, the industry’s strongest growth since 1990.

While recent financial results from Intel Corp. and other chipmakers have pointed to a recovery, the SIA’s quarterly leap point to a rally in the PC market with a 33.2 percent increase in DRAMs [define] and an almost 24 percent jump in microprocessor sales.

The chip industry is also deriving financial benefit to the spike in development of more sophisticated cell phones, digital cameras and personal digital assistants. The SIA said demand for flash memory chips was up 27 percent and digital signal processors grew by 20 percent.

“Optoelectronics were up 14.6 percent and Application Specific Standardized Products (ASSPs) were up 17.2 percent this quarter,” according to the SIA.

The SIA said the Asia-Pacific market saw the biggest regional jump in sales around the world. Asia grew by 19 percent, whereas Europe moved 12 percent higher, but the Americas only rose by 8.6 percent.

Besides Intel, Advanced Micro Devices has also said sales in the latest quarter were even better than expected. But all of the positive numbers need to be placed in the context that the semiconductor sector has been in a serious slump for three straight years.

“Demand in the global semiconductor market is rising briskly,” SIA President George Scalise said in a statement.

“Performance is strong in all major market sectors – computation, communications and consumer, indicating a solid, continuing and broad-based growth cycle,” added Scalise.

“The better than expected 7.2 percent rise in GDP for the third quarter, was driven by a combination of a record 6.6 percent increase in consumer outlays, and strong business spending, as investment in computers and software rose 15.4 percent, after an 8.3 percent gain in the year’s second quarter,” Scalise said.

Intel’s CFO recently told analysts his company’s sales have seen strong growth in the emerging markets of China, India and Russia. China has become the world’s largest customer of wireless phone handsets and the second largest market for PC’s.

Intel CEO Craig Barrett told the Swiss newspaper NZZ am Sonntag that “in principle I am optimistic about the future. I am speaking about a timespan of five or 10 years. But regarding the next quarter there are many imponderables. SARS could break out again, there could be war again.”

In another sign of strength in the sector, the Philadelphia Semiconductor Index is up more than 50 percent this year.