SAN JOSE, Calif. The Semiconductor Industry Association (SIA) said worldwide sales of semiconductors rose to $18.2 billion in August, exceeding expectations of $18 billion (see Tuesday, Sept. 28 story) and 34.2 percent ahead of the equivalent figure in 2003.
The total represents a stronger result after talk of an inventory correction had percolated through the industry and suggested a slower August. The relative strength of the results is ascribed to strong PC and wireless infrasstructure sales, as well as fast inventory correction.
The August worldwide sales figure announced by SIA is an average of the "actual" sales figures for June, July and August. The July 2004 average sales figure was $18 billion, which was up 37.9 percent from the $13 billion reported in July 2003. So although growth slowed between July and August it did not do so by much.
The world's semiconductor industry associations release sales reports as three-month averages of monthly sales activity to smooth out variations due to companies' monthly financial calendars, which tend to inflate March, June, September and December sales figures.
"Semiconductor producers and their customers have reacted with unprecedented speed to recent reports of excess chip inventories," said SIA President George Scalise, in a statement. "In previous market cycles, it has generally taken several quarters for the supply chain to take corrective action. When the first reports of excess inventory accumulation surfaced in the second quarter, both producers and customers moved quickly to adjust. Both VLSI Research and iSuppli are now reporting that chip inventories are declining," Scalise said.
Scalise said manufacturing capacity utilization has declined, reaching 95 percent in the second quarter but with leading-edge and foundry capacity running at 99 percent. "We expect a modest decline in capacity utilization rates in the current quarter," said Scalise. "Capital spending has been running at around 23 percent of sales, which is in line with historical patterns. At this time, we do not believe overcapacity will be a major concern in 2005," he said.
"With both producers and customers paying close attention to chip inventories and taking action quickly, we expect that semiconductor sales will continue to show steady growth through the balance of the year and will meet the current forecast of 28 percent growth for all of 2004," said Scalise. SIA will release its 2005 industry forecast on Nov. 3.
The SIA noted that sales of personal computers and equipment for networking and telecommunications contributed to semiconductor sales growth in August. Sales of microprocessors increased by 3.5 percent sequentially, reflecting PC sales patterns of the back-to-school season.
Chip sales were up modestly in all geographic regions. In the Asia-Pacific region, however, sales increased by only 0.1 percent sequentially, reflecting the impact of inventory adjustment actions taken by manufacturers of electronic products.