SIA says chip sales will flatten after record 2004

MANHASSET, N.Y. — The Semiconductor Industry Association (SIA) released its annual forecast for 2004 to 2007, predicting sales to rise 28.5 percent to a record $213.8 billion in 2004 but remain essentially flat in 2005, as the excess inventory problems many chip companies are now reporting make their impact felt.

The forecast projects sales will grow by 6.3 percent to $227.2 billion in 2006 and by 14.2 percent to $259.4 billion in 2007. According to the SIA, projections of a less favorable supply-and-demand balance for memory products will be the major factor in dampening industry expansion next year.

For the longer term, the new forecast projects a compound annual growth rate of 11.8 percent through the forecast period.

Previously, the SIA's midyear forecast also predicted 2004 sales to top off near $214 billion, but projected 4.2 percent growth in 2005 followed by an 0.8 percent decline in 2006. Sales were expected to rebound in 2007, growing 11.7 percent to reach $250 billion.

Last year's chip sales were $166.4 billion, while the previous record for chip sales was $204 billion in 2000, according to the SIA.

Earlier this week, the World Semiconductor Trade Statistics group cut its 2005 growth projection to 1.2 percent over 2004 sales of $213.78 billion, replacing an earlier projection for 8.5 percent growth next year followed by 3.0 percent and 11.4 percent annual growth in 2006 and 2007, respectively.