World chip sales flat in August

Inventory corrections put pressure on vendors

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Chip sales growth effectively stalled in August, it emerged today when the Semiconductor Industry Association (SIA) released its monthly sales report for the period.

During August, global semiconductor sales totalled $18.2bn, up just 1.1 per cent on July's $18bn total.

Attempting to downplay such a slight sequential sales increase, the SIA said that the figure was "in line with historical patterns for August". However, it comes after July's sales proved to be only just over one percentage point up in June's total, less than half the growth seen between May and June.

August's figure brings the year's sales total to just over $135.6bn. The SIA has already forecast 2004 will see sales hit at least $216bn, 28 per cent up on 2003's figure. If that prediction is to prove accurate, the industry needs to sell $80.4bn worth of chips in September through December - $20.1bn a month on average.

It's going to have a hard time doing so the current sequential growth rate. To sell $20.1bn worth of chips in September, sales will have had to have rise just over ten per cent on August's figure.

The cause is clear: the Q2 inventory build-up and its knock-on effect on Q3 sales. The SIA claims that chip makers and buyers have reacted swiftly to deal with excess inventories. If so, that bodes well for the coming months. According to the SIA, market watchers VLSI and iSuppli "are now reporting that chip inventories are declining". The question is, have they declined sufficiently now to get orders back up the level needed to make good the SIA's 2004 forecast.

"We expect that semiconductor sales will continue to show steady growth through the balance of the year and will meet the current forecast of 28 per cent growth for all of 2004," said the SIA's president, George Scalise, in a statement.

To be fair, August's growth rate might have been higher had Asia-Pacific's inventory correction led rate of 0.1 per cent not pulled the overall figure down. In the Americas, Europe and Japan, sales were up 2.2, 1.6 and 1.5 per cent, respectively.

The SIA said it will release its 2005 industry forecast on 3 November. ®

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