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The microchip sector is set to return to growth, with the Semiconductor Industry Association predicting a 6 per cent rise in sales to a record $226bn for 2005.

The SIA predicted last November that sales would be flat this year, matching the $213bn of 2004. But in its mid-year update on Wednesday, it said fears that high energy prices and lingering excess inventories would damp sales had not materialised as economic growth remained strong.

George Scalise, president of the industry body, said: “Worldwide sales of semiconductors have been stronger than expected through the first quarter of 2005 . . . driven by better-than-expected demand in a number of important end markets, including personal computers and wireless handsets.”

Excess inventories had largely been worked off in the first quarter and were no longer a factor in the outlook, said Mr Scalise.

Prompt action by chipmakers and customers meant that inventories had not risen above $1.5bn, compared with the $15bn of excess inventory suffered at the end of 2000.

The SIA projects a compound annual growth rate of 9.8 per cent to the end of 2008, when sales should reach $309bn.

It expected mobile phone sales to grow 13 per cent, while PC growth would be unchanged at 10 per cent. Digital TV sales would rise 65 per cent, against its earlier forecast of 50 per cent, and digital cameras by 15 per cent, against 6 per cent. The Asia-Pacific region would continue to be the fastest growing area and would account for 46 per cent of the worldwidemarket in 2008, it predicted.

The SIA's growth forecast almost matches that of research firm iSuppli, which predicts growth of 6.1 per cent in 2005, and of World Semiconductor Trade Statistics, which is expecting 6.3 per cent.

On Tuesday, iSuppli reported industry sales in the first quarter were down 3.1 per cent from the fourth quarter to $57bn.

Japanese chip suppliers Renesas and Toshiba bucked the trend, posting revenue rises of 10 per cent and 8.6 per cent respectively.

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