Price cuts are continuing to hurt profits for chip makers, even though actual sales are increasing.

In the first half of 2007, worldwide chip sales hit $121bn, up two per cent on the first six months of 2006.

Semiconductor Industry Association president George Scalise said: "Continuing rapid price attrition in several important market segments held growth in total semiconductor sales to just over two per cent in the first half of 2007 despite increases in total unit shipments of almost seven per cent."

The association reckons PC sales will grow 10 per cent in 2007.

The average price for a desktop PC has dropped to around $700, and they have 50 per cent more memory than a year ago.

Sales of mobile phones are also up 10 per cent, but sales of Digital Signal Processing (DSP) chips grew only three per cent - suggesting excess inventory.

But all this growth in sales numbers was undermined by falling prices. DRAM prices fell 40 per cent while unit sales jumped 66 per cent on last year. Shipments of NAND chips were up almost 40 per cent, but average selling prices fell 15 per cent.

SIA figures are available here (http://www.sia-online.org/pre_release.cfm?ID=447).

In other chip news, Samsung said on Friday that it was forced to shut down six chip lines due to a power failure at its fab near Seoul. Analysts suggested that the loss of any chips on the lines at the time, plus a two week cleanup before production restarted, could leave Samsung with almost a month's worth of lost inventory. But the plant was back up and running on Saturday leading Samsung to say losses would be lower than predicted. A power substation at the factory was blamed for the blackout.

More form the Chosun Ilbo here (http://english.chosun.com/w21data/html/news/200708/200708060027.html). ®

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