31 January 2005

Semiconductor sales stable

The three-month average of worldwide sales of semiconductors was $18.27bn in January, down 0.5% from the previous month's $18.37bn and encouragingly 17.5% higher than January 2004 three-month average sales of $15.6bn reports the US Semiconductor Industry Association.

Year-on-year growth in the three-month average increased from the 14.6% recorded for Dec. 2004 and the latest global sales announcement was ahead of analyst prediction, indicating a rebound of January's actual sales.

The SIA's Global Sales Report is tabulated by the World Semiconductor Trade Statistics organization as a moving three-month average to reduce the swings due to reporting effects from different companies.

"The modest sequential sales decline of one-half of 1% in January is an encouraging sign," said SIA president George Scalise.. "January is historically one of the weakest months for the microchip industry. We are encouraged by recent signs of strength in the overall US economy, as evidenced by the 3.8 % growth in GDP in the Q4.

"Dan Hutcheson of VLSI Research has noted that when GDP grows by more than 3%, semiconductor sales have shown healthy growth, except when there are excesses of inventory or production capacity. At the present time, neither production capacity nor inventory excess is a problem."

"According to iSuppli, excess inventories declined from $1.6bn at the end of the 3Q to $1bn at year end. In some market segments, inventories are now below target levels, thus we are confident that inventory issues will not be a significant factor in semiconductor sales beyond the 1Q." Factory utilixation continued to decline, as expected, throughout the second half of 2004."

Overall IC manufacturing capacity utilisation was 86 % in the 4Q, and leading-edge capacity utilisation was at 93%. Industry capital spending increased to approximately $47bn, roughly 22% of total 2004 sales.

"In a year of record industry sales, this level of capital spending is in line with capacity needs going forward and should not lead to either excess capacity or severe price pressures," said Scalise.