Memory weighs down January semiconductor sales

Putting the memory market aside, the SIA reported unit shipments of personal computers and cellular handsets were in line with expectations in January.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 3/3/2008

The harsh memory market has once again strongly impacted the overall semiconductor.

The Semiconductor Industry Association (SIA) today reported worldwide sales of semiconductors in January reached $21.5 billion, a 0.3% increase on January 2007 results of $21.47 billion and a 3.6% decrease on December 2007 results of $22.3 billion. 

While the industry group made note of the usual seasonal patterns as reason for the month-over-month decline in sales, it also noted the severe memory pricing environment.

“Virtually all product lines and all geographic markets experienced slightly lower sales in January,” SIA president George Scalise said in a statement. “Unit shipments of DRAMs and NAND flash grew modestly in January. Even with healthy demand from important end markets, however, a very competitive environment resulted in price pressures for these products which in turn led to continued erosion in average selling prices. Excluding memory products, semiconductor sales were up by 8.1% year-on-year.”

Indeed, many industry-watching organizations have warned of the weak memory pricing environment and its coupled oversupply situation brought on by fierce competition in the market. ISuppli, for one, trimmed its 2008 forecast on the memory market and last week slashed its forecast for NAND memory market revenue growth on reports that Apple Inc has issued order reductions for the flash memory.

The SIA continued to report that unit shipments of personal computers and cellular handsets were in line with expectations in January. Analysts are projecting unit growth of around 12% for PCs and 12 to 15% for cellular handsets in 2008, according to the group, which also estimated that PCs and cell phones together account for approximately 60% of worldwide semiconductor sales.

“The US economy has entered a period of slower growth that may impact consumer purchases of electronic products,” Scalise said. “However the emergence and growth of large consumer markets outside the US has created new opportunities for chip makers.”  

Scalise noted that PC demand outside the US has grown steadily through the past decade. “In 1998, the US accounted for more than 40% of all unit sales of personal computers. In 2008, according to JP Morgan and Gartner, the US will account for approximately 21% of PC units.  Several foreign markets will account for higher unit sales of PCs than the US. The emergence of these global markets underscores the importance of maintaining open markets and eliminating barriers to international commerce,” Scalise concluded.