World chip sales up 3% in Sept.

SAN FRANCISCO: Global semiconductor sales rose by a slightly less-than-expected 3 percent to $12.3 billion in September from August, according to figures published on Friday from an industry group, as chipmakers braced for a potentially sluggish fourth quarter.

The September sales numbers, released by the World Semiconductor Trade Statistics (WSTS) group, showed revenues rose 21 percent from the same month a year earlier. The $139 billion-a-year industry usually sees a holiday rally toward the end of the year as electronics makers stock up on the semiconductors that make their computers, phones and toys work. But many executives and analysts already expect this holiday-selling season to be muted.

"My gut feeling is that the third and fourth quarter is going to be a little flatter than we'd see from typical seasonality," said Eric Ross, semiconductor analyst for investment bank Investec. Chipmakers such as Intel Corp. and Texas Instruments Inc. warned investors last month that they expected the traditional fourth-quarter upturn to be very limited and pricing pressure to be severe.

"Our forecast for all of 2002 continues to stand at flat (year over year), and we see little in the September numbers that might cause us to change our mind," Joe Osha, an analyst at Merrill Lynch, wrote in a note to clients in which he cited similar figures released by the Semiconductor Industry Association, a trade group based in San Jose, California.

September's month-on-month growth was slightly faster than in the traditional slow summer month of August, when sales rose 2.1 percent.

"The recovery of the semiconductor industry has picked up breadth and strength as the year has progressed," said SIA President George Scalise in a statement. The sequential third-quarter growth follows 5.8 percent sequential growth in the second-quarter 5.6 percent growth in the year's second quarter, with momentum across major product sectors, including wireless, digital consumer products, PCs and automotive, Scalise said.

Sales of flash memory chips, digital signal processors, or DSP chips, and wireless application-specific standard products all rose by double digits in the third quarter, the SIA said. Chips used in such popular consumer products as video games, DVDs, and digital cameras also rose in the quarter, including 21 percent growth in standard cell-chips and a 15 percent increase in optoelectronics-related chips.

September chip sales came in about $250 million below the estimates suggested by WSTS's own third-quarter forecast, industry sources said. Europe performed better than expected, the U.S. worse than forecast, and Asia slightly slower but still strong.

Industry sources said controllers, used in many automotive applications such as airbags and brake controllers, were doing well. This could help explain European outperformance, because chip makers such as Franco-Italian STMicroelectronics and Germany's Infineon Technologies AG are big players in car chips. But demand for other key semiconductor products such as computers and cell phones grew slowly on the back of an uncertain economic outlook.

September chip sales, measured as a three-month average to eliminate short-term swings, grew 4.6 percent to $2.3 billion in Europe compared with August. Revenues in the Americas grew two percent to $2.6 billion, and in Asia Pacific 3.1 percent to $4.5 billion. Sales in Japan were up 2.7 percent at $2.8 billion

Compared with a year earlier, September sales grew 10.6 percent in Europe, 8.0 percent in the Americas and 39.1 percent in Asia Pacific. Japan grew 17.3 percent.

(c) Reuters Ltd.