Semiconductor industry to post record sales result for 2006

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Semiconductor industry to post record sales result for 2006

San Jose (CA) – While chip manufacturer have not yet confirmed their December 2006 sales figures, it is already certain that the industry has posted yet another year of substantial growth – after moderate and even flat growth had been predicted at the beginning of last year.

Including November sales of $22.7 billion, an 11.3% increase over the same period of 2005, 2006 sales reached $225.1 billion. With December historically being in the range of the November result, the industry is on track meeting its own forecast of annual sales of about $249 billion and clearly exceeding the 2005 tally of $227.5 billion.

Consumer electronics remained the driving force behind semiconductor sales, the Semiconductor Industry Association (SIA) reported. Unit sales of consumer electronic products such as flat-panel displays and digital cameras were ahead of forecasts in the holiday season and resulted in strong revenue growth despite some erosion in the average selling price for some products.

According to the Consumer Electronics Association (CEA), unit numbers of digital cameras in the U.S. market were up 30% over November 2005 and up over 40% for the first eleven months of 2006. Semiconductor product lines that showed strong sequential growth included digital signal processors (+12.3%), DRAM (+6.8%), NAND flash (+6.3%) and microprocessors (+4.3%).

Market research firm iSuppli was first to issue a sales forecast for the new year and mentioned that it believes that the industry will expand even stronger than in 2006. In a prediction that is clearly much more optimistic than what we have seen in early 2006, the firm said that the chip business may grow by about 10.6% to about $286 billion this year. This number is ahead of the SIA’s forecast of about $274 billion. Still, iSuppli considers its number as “bad news” as the growth pace is expected to remain “far below historical market peaks.”

Growth is further estimated to decelerate to 8.7% for total sales of $311 billion in 2008 and 3.7% in 2009 ($322 billion total sales). The firm believes that a cyclical uptick will occur in 2010, when the industry could grow by 7.4% to $346 billion. The SIA said that that it expects growth rates of 10.8% in 2008 and 5.8% in 2009.