Semiconductor industry to grow at 7- 9% in Q3

SAN JOSE, California: The global computer chip production industry is on track for 7 percent to 9 percent sequential growth in sales for the third quarter over the second quarter, a U.S. trade group predicted on Tuesday. The Silicon Valley-based Semiconductor Industry Association made the forecast as it released World Semiconductor Trade Statistics figures that showed a global sales increase of 2.9 percent to $11.7 billion in July over June.

"The July data, and the year-on-year increase, confirm that a moderate but sustainable recovery continues, putting us on track for 7-9 percent sequential growth in the third quarter," SIA President George Scalise said in a statement. A summary of the WSTS statistics was released on Friday by the European Electronic Component Manufacturers Association (EECA), a European counterpart to the U.S.-centered SIA trade group.

Global semiconductor sales grew 5.8 percent during the second quarter, according to the Semiconductor Industry Association. The U.S. trade group said that for 2002 overall, worldwide chip sales are expected to exceed depressed 2001 levels by 3 percent. It said the industry continues to expect a return to higher growth rates over 20 percent in 2003 and 2004.

Analyst says industry forecasts remain bloated

But UBS Warburg analyst Tom Thornhill said in a note to investors on Tuesday that he believes major chip suppliers will continue to moderate their growth expectations for the rest of 2002 in mid-quarter financial updates set to be unveiled over the next week, including one from Intel Corp.

Thornhill, who said that unit shipments fell again during July, noted that average selling prices for computer chips have returned to 10-year lows hit earlier this spring.

Thornhill recently reduced his 2002 industry sales forecast to a range of flat performance to contraction of 2 percent -- down from the zero to 5 percent growth he had predicted. He also had cut his 2003 sales growth estimate to a range of 9 percent to 13 percent from a range of 15 percent to 20 percent.

Scalise said that the July figures reflected robust growth in sales of consumer electronics such as digital video, video games and digital cameras. Demand for communications chips in wireless phones and network equipment also rose, with the latter reflecting a burn-off of in excess inventory more than fundamental market demand in the depressed telecoms market. The personal computer remained weak, reflecting recent trends, the trade group said.

Thornhill said the only standout sector was dynamic random access memory (DRAM) chips, sales of which grew 4.6 percent in July over June, while other major sectors such as microprocessors and digital signal processors (DSPs) fell sharply.

Major makers of memory chips include Micron Technology Inc. of the United States, South Korea's Samsung Electronics Co. Ltd., Germany's Infineon Technologies AG and other makers in Japan, South Korea and Taiwan.

Chip sales by American and European producers were essentially flat during July, reflecting weak PC demand in both markets and continued outsourcing of production to the Asia-Pacific region. By contrast, sales of Japanese producers, which is focused on digital consumer electronics production, grew 8.5 percent, while sales of Asia-Pacific producers outside Japan grew 2.3 percent, the SIA said.

© Reuters