Chip industry in $247bn sales record

The chip industry on Friday hailed 2006 as the year of the consumer as it reported record global sales of semiconductors worth $247.7bn.

The Semiconductor Industry Association said sales increased 8.9 per cent on the $227.5bn recorded in 2005. Worldwide sales in December rose 9 per cent to $21.7bn from the $20bn recorded a year earlier.

“2006 was the year of the consumer in the electronics industry,” said George
Scalise, SIA president.

“Sales growth was largely driven by popular consumer products such as mobile phones, MP3 players and HD-TV sets – all products that have proliferated as semiconductor technology has enabled dramatically lower costs coupled with improved functionality.”

Mr Scalise quoted the iSuppli research firm as reporting that the semiconductor content of electronic systems on a cost basis had increased steadily to be 21.6 per cent.

While mobile phone shipments had topped 1bn in 2006, the average semiconductor content of a handset fell slightly to $40, due to increasing demand for low-cost phones in emerging markets.

More than 34m MP3 players were sold in the US but growth rates were likely to slow going forward, the SIA said. However, semiconductor content was increasing due to growing storage capacity and new functionality such as video.

About 235m PCs were shipped in 2006 and they continued to account for a significant portion of semiconductor consumption, in spite of slowing growth.

“Indications are that US sales of HD-TV units more than doubled in 2006 driven by sharply falling prices and increasing high-definition programming. We expect demand for HD-TV monitors will continue to grow sharply for the next several years,” Mr Scalise said.

The 2006 global sales fell 0.4 per cent short of the SIA’s forecast of $248.8bn. The SIA forecast for 2007 was of 10 per cent growth to $273.8bn with healthy economic conditions in all leading markets. December’s figures represented a 3.6 per cent decline on November sales of $22.5bn.

Glen Yeung, Citigroup semiconductor analyst, noted that the final figures for the fourth quarter showed an 8 per cent decline in wireless infrastructure chips compared with the third quarter. He expected continued weakness but said the figures gave some encouragement that conditions were bottoming.