Demand for PCs and mobile phones in emerging markets gave US chip makers a solid first half of the year in sales.

Growing middle-class populations in China, India, Eastern Europe and Latin America offset American economic headwinds and the plunging prices of memory, the Semiconductor Industry Association said today.

The trade organization said PC sales accounted for about 40 per cent of chips sold worldwide. Cell phones drove about 20 per cent of demand.

"Emerging markets are a major factor in driving worldwide semiconductor sales," stated SIA president George Scalise. PC unit sales in emerging markets are expected to grow by 19 percent – more than double the growth rate in developed markets this year. In 2008, developing countries – with sales of over 153 million units - will account for half of worldwide PC sales. In mobile phones developing countries are expected to account for 66 percent of total worldwide unit sales of over 1.3 billion, up from 61 percent last year."

But sinking memory prices continue to worry the industry. SIA said total semiconductor sales in June, excluding memory products, would have grown by 12 per cent year over year.

Price drops in memory products contributed to a 6 per cent year-over-year decline in total memory sales despite "sharply" increased unit sales, the trade association said.

"Rapid price declines for microchips tend to mask the real growth of the industry," said Scalise. "The cost of 1 gigabit of DRAM has declined by 43 percent during the past year, while the price of 2 gigabits of NAND flash has declined by 61 percent in the last 12 months."

Fortunately for buyers, the lower prices equates to increased memory content in consumer devices. SIA cites the memory maker Micron, which estimates memory content of the average PC will increase at least 50 per cent this year. The average cell phone capacity will increase by more than 150 per cent.

Pardon our callousness, but these memory industry tears taste delicious from where we're standing. ®