2004 Global Semi Sales Hit Record High

Online Staff -- Electronic News, 1/31/2005

Worldwide sales of semiconductors reached a record $213 billion last year, a 28 percent increase from $166.4 billion in 2003, the Semiconductor Industry Association (SIA) reported today.

For December, chip sales declined by 3.5 percent sequentially to $18.4 billion from $19 billion in November, in line with historical seasonality, but 14.6 percent higher than December 2003. Global semiconductor sales in Q4 declined 0.8 percent sequentially to $55.1 billion from Q3 sales of $55.5 billion.

“Strong demand from a very broad spectrum of end markets propelled worldwide semiconductor sales to a record $213 billion in 2004,” George Scalise, SIA president, said in a statement.

“For the first time since 2000, global chip sales surpassed $200 billion. The industry’s growth over the past three years is even more remarkable when viewed in a broader perspective. Worldwide sales of semiconductors fell to $139 billion in 2001 following the collapse of the dot-com boom, the 9/11 terrorist attacks, and a mild economic downturn,” he continued.

“Fears that high gasoline prices would seriously dampen sales of consumer electronics during the holiday season did not materialize. A moderation of gas prices coupled with good economic growth appears to have bolstered consumer confidence, an increasingly important consideration for the semiconductor industry, as purchases by individual consumers now account for more than half of all chip sales,” Scalise added.

Further, strong year-on-year growth during the first half of 2004 drove worldwide sales growth at a faster rate than the earlier SIA forecast of 19 percent growth for the year as a whole. Global chip sales grew by 36.5 percent year-on-year during the first half of 2004 compared to 21 percent in the second half.

Looking ahead, “We expect that global sales will decline by 4 to 6 percent sequentially in the current quarter in part due to continuing efforts by the entire supply chain to reduce excess inventories and a very competitive market environment,” Scalise explained.

“A seasonal decline in consumer spending patterns in [Q1] also contributes to our forecast of a modest decline. We believe factory utilization rates will continue to decline modestly in [Q1]. Our outlook for the year as whole continues to project essentially flat sales at the record level of 2004," Scalise concluded.

Strong growth in PC and wireless handset sales were some of the largest drivers of last year’s chip sales. According to IDC, PC sales reached 177 million units in 2004, a year-on-year increase of nearly 15 percent. Strong PC sales contributed to very strong growth in sales of DRAMs. Total DRAM sales grew by nearly 61 percent in 2004, by far the fastest-growing product line in the chip industry. Microprocessor sales grew by just over 11 percent year-on-year, IDC reported.

Another market research firm, Strategy Analytics, reported that wireless handset sales rose to 674 million units in 2004, up by more than 32 percent from 2003. Handset growth contributed to strong sales of DSPs, which increased by more than 27 percent year-on-year. Sales of optoelectronic chips, widely used in digital cameras, grew by almost 44 percent year-on-year.

On a geographic basis, the Asia-Pacific region, including China and Taiwan, once again led the world in sales growth with a year-on-year increase of more than 41 percent. At $88.7 billion in total semiconductor sales, the Asia-Pacific Region was nearly double the size of the second-largest market, Japan, with total sales of $45.7 billion. Chip sales in Europe grew by 22 percent year-on-year; in the Americas by 21 percent; and in Japan by 17.5 percent.