SIA: Semiconductor sales hit $247.7B in 2006

By Colleen Taylor -- Electronic News, 2/2/2007

Semiconductor sales hit an all-time high in 2006, according to the Semiconductor Industry Association (SIA), which today reported that worldwide sales of semiconductors reached $247.7 billion last year, an increase of 8.9 percent from the $227.5 billion reported in 2005.

Worldwide sales in December 2006 were $21.7 billion, an increase of 9 percent from December 2005 when sales were $20 billion, SIA data showed. However, December sales declined by 3.6 percent from November, when sales were $22.5 billion. Worldwide sales in Q4 were $65.2 billion, an increase of 9 percent over Q4 2005 sales of $59.9 billion and an increase of 1.9 percent over Q3 2006 sales of $64 billion.

"2006 was the 'year of the consumer' in the electronics industry," SIA President George Scalise said in a statement. "Sales growth was largely driven by popular consumer products such as cell phones, MP3 players, and HDTV sets -- all products that have proliferated as semiconductor technology has enabled dramatically lower costs coupled with improved functionality.

"Cell phone shipments exceeded one billion units in 2006," Scalise added. "The average semiconductor content of a cell phone fell slightly to around $40 last year, mainly due to demand for low-end phones in emerging markets. Growth of cell phone subscriptions in emerging markets continues to be strong.

Scalise further reported that more than 34 million MP3 players were sold in the U.S. in 2006. He noted that while the growth rate for MP3 players is likely to slow going forward, the semiconductor content of these devices is growing as a result of increased storage capacity and addition of new functionality such as video capability.

SIA preliminary estimates on worldwide personal computer sales show that some 235 million units were shipped in 2006. “Despite a somewhat slower growth rate as a result of high penetration in some developed country markets, PCs continue to account for a significant portion of semiconductor consumption," Scalise said.

Scalise added that U.S. sales of high-definition television (HDTV) units more than doubled in 2006, and he said that SIA expects demand for HDTV monitors to "continue to grow sharply" for the next several years. This SIA data backs data from the Consumer Electronics Association release last month that showed a record year for TV sales overall and that HDTV continues to claim 85 percent of the total digital TV market. iSuppli also reported this week price drops on HDTVs in preparation for Sunday's Super Bowl, a move the firm believes will help move TVs in Q1.

SIA also noted that favorable economic conditions in the major world markets have contributed to growth of semiconductor sales. "The GDP increase of 3.4 percent in 2006 reflected continuing strength of the U.S. economy, which is the largest market for end products," Scalise said. "The Asia-Pacific region, in which China is the largest country market, experienced the strongest growth in semiconductor sales with a growth rate of 12.7 percent in 2006."

SIA noted that capacity utilization rates remained strong throughout 2006. Indeed, Strategic Marketing Associates recently estimated that the worldwide industry spent approximately 22 percent of revenues on capital additions in 2006. SIA commented that the current ratio of capital expenditures to sales is in line with maintaining balanced supply and demand.

Scalise noted that 2006 global sales came within 0.4 percent of the SIA forecast of $248.8 billion. "With generally healthy economic conditions in all of the world's major semiconductor markets, we believe our forecast of 10 percent growth to $273.8 billion in worldwide sales in 2007 is aligned," Scalise concluded.

Wall Street watcher Lehman Brothers was a bit more cautious with its outlook based on the SIA report. Near term, the firm said in a research note released today that it expects "mixed data points" in 2007, notably for the PC and wireless sectors, and a "choppy trading environment" in a seasonally slow Q1.  However, Lehman said it does maintain a positive sector view, based on what it called the "generally constructive end-market trends," as well as a roster of new product ramps helping the backdrop for the second half of 2007.