San Jose (CA) - The official number is in: The semiconductor industry increased its sales in 2004 by an expected 28 percent over 2003. The Semiconductor Industry Association (SIA) however expects declining sales for the current quarter and flat revenues for the year.

Although it is quickly moving into a cyclical downturn, the semiconductor industry celebrates a 2004 record year. Manufacturers raked in $213 billion, a 28 percent increase from $166.4 billion a year earlier, the SIA said on Monday.

"Strong demand from a very broad spectrum of end markets propelled worldwide semiconductor sales to a record $213 billion in 2004," said SIA President George Scalise. "For the first time since 2000, global chip sales surpassed $200 billion. The industry's growth over the past three years is even more remarkable when viewed in a broader perspective. Worldwide sales of semiconductors fell to $139 billion in 2001 following the collapse of the dot-com boom, the 9/11 terrorist attacks, and an economic downturn.

"Fears that high gasoline prices would seriously dampen sales of consumer electronics during the holiday season did not materialize," Scalise said. "A moderation of gas prices coupled with good economic growth appears to have bolstered consumer confidence, an increasingly important consideration for the semiconductor industry, as purchases by individual consumers now account for more than half of all chip sales."

Scalise noted that very strong year-on-year growth during the first half of 2004 drove worldwide sales growth at a faster rate than the earlier SIA forecast of 19 percent growth for the year as a whole. Global chip sales grew by 36.5 percent year-on-year during the first half of 2004 compared to 21 percent in the second half. "By any standard, the 21 percent year-on-year growth in the second half of 2004 was very robust, but did not match the extremely strong first - half growth rate," Scalise continued.

The SIA expects chip sales to decline by four to six percent sequentially in the current quarter due to the ongoing "effort to reduce excess inventories", "a very competitive market environment" as well as a "modest decline" in consumer spending patterns. For the whole year of 2005, the SIA expects revenues to remain flat on 2004's levels. Some analysts said the industry is also likely to face declining sales.

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Source : Tom's Hardware US