Global chip sales are set to grow by a thumping 10 per cent this year as demand for portable electronic devices takes hold.

According to Semiconductor Equipment and Materials International (SEMI), market demand for gadgets will continue to bump up microchip spending from last year's $228bn - a surge that will be felt throughout the sector.

The global semiconductor equipment market is to grow 10 per cent to $36.12bn this year, up from $32.88bn last year, while the market for semiconductor materials is also in for a 10 per cent surge to reach $34.5bn.

All eyes are on the south-east Asian market in particular, which is expected to experience strong long-term growth.

These latest predictions follow a recent report by the Semiconductor Industry Association (SIA) that showed sales of chips hit a record in 2005. SIA data showed sales achieved a high of $227.5bn last year, up 6.8 per cent on 2004, with LCD and plasma displays behind much of the growth.

Music players and mobile phones are also helping to boost growth in the market as popular music players shift to memory chip technologies rather than hard drives.

At the time of its report the SIA also predicted a 10 per cent compounded annual growth rate between 2005 and 2008, ensuring healthy sales for the foreseeable future.

As prices for semiconductors fall, chipmakers are concentrating their efforts on innovation in the chip market, with a number of new products hitting the electronics market in recent months.

Intel has plans for a new "Merom" CPU, while rumours are currently doing the rounds that rival AMD has pushed back the launch of its dual-core Turion-64 mobile processors to June. Earlier this year Intel announced plans to get its chips into the living room based on an ambitious expansion plan to integrate Intel devices into the home electronics market. This will increase competition between Intel and rival AMD.

Falling prices have been a serious issue for semiconductor firms, with NEC Electronics blaming this trend for its recent losses. The Japanese firm recently announced that it would close its Irish semiconductor plant in Meath, with the loss of 350 jobs, and move production to cheaper labour markets in China and Malaysia.

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