Global semiconductor industry on track for solid growth in 2005

San Jose (CA) - All those storm clouds forecasted to shake up the semiconductor industry in 2005 are gone. According to the Semiconductor Industry Association (SIA), sales of chip manufacturers in the first half of 2005 are well above 2004 levels and are expected to set a new record result of $226 billion by the end of the year.

A strong demand for chips in consumer devices saves the semiconductor industry from a cyclical and widely expected downturn this year. Once again, growth in the cellphone market as well as an accelerating momentum in consumer electronics, including digital TVs, digital cameras and MP3 players, guaranteed manufacturers a reliable revenue source. On a global basis, manufacturers reported sales of $109.0 billion, up 6.5 percent over the first six months in 2004 ($102.4 billion).

Sales in June 2005 were $18.1 billion, up about 0.8 percent over June of last year, but down 0.5 percent sequentially. The second quarter of 2005 came in at $53.9 billion, a decline of 2.1 percent from the $55.1 billion reported in the first quarter.

"The nominal decline in global semiconductor sales in June was caused in part by inventory adjustments in the distribution channel and price attrition in DRAMs," said Scalise. "We are encouraged by the fact that sales for the first half of this year were up by 6.5 percent over the same period of 2004," Scalise continued. "The strongest growth in 2004 occurred in the first half of the year. In contrast, we expect the strongest growth in 2005 will occur in the second half of the year." The organization estimates revenue gains for this year at about 6 percent which would mean total sales of about $226 billion - the highest level ever reported for the industry.

Scalise said that semiconductor manufacturers cleared out their inventory in the first half of this setting a healthy foundation for revenue growth. The SIA currently values global chip inventory levels at about $1 billion. This compares to more than $15 billion in the fourth quarter of 2004, at a time when the computer industry entered a sharp market downturn.