The semiconductor market has experienced a price war in recent months, but growth in the sector is still strong and the outlook for the second half of 2006 is good, according to the Semiconductor Industry Association (SIA).
The news from the SIA comes as market watcher iSuppli highlighted “worrying” levels of Intel semiconductor stockpiles during the second quarter of the year. However, this did not damage the global chip sector.
Worldwide sales of semiconductors totalled $19.6bn in June, up by more than nine per cent on June 2005, the SIA said. This brought the Q2 total for 2006 to $58.9bn, a slight decrease of 0.3 per cent compared with Q1 of this year, but up by 9.4 per cent on the same period last year. For the first half of 2006, sales have risen by eight per cent compared with 2005.
The SIA noted that strong growth of about 10 per cent in PC unit sales played a key role, but price wars continue to rage. Average sales prices fell in all PC sectors, with the average price of a laptop dropping by more than 18 per cent compared with the same period in 2005.
George Scalise, president of the SIA, said: “[These figures] reflect the mixed earnings results we have seen in the industry over the past few weeks. Unit demand has remained strong this quarter, up by about five per cent across the industry. Strong competitive pressures, which have reduced prices in some major product sectors, are having an impact on revenues.
“Communications applications grew at a steady pace year-on-year. The market represents one-quarter of total demand in the industry. Unit demand for [mobile] phones in the past quarter was 235 million units. This figure is expected to grow by more than four per cent this quarter and at
least 10 per cent next quarter, with total [mobile] phone demand this year nearing the one billion unit mark.”
On the Intel front, iSuppli noted that excess stockpiles of PC microprocessors and core-logic chipsets caused surplus semiconductor inventories in the global supply chain to rise higher than expected in Q2.
Rosemary Farrell, analyst at iSuppli, said: “Excess inventories have exceeded the worrying levels seen during the last semiconductor supply snafu in mid-2004. However, with most of the excess inventory restricted to PC-related chips, and mainly to a single supplier [Intel], the surplus stockpiles is not a major concern for the global electronics industry.
“With more price reductions expected from Intel and AMD, customers have been placing smaller, more frequent orders than normal to delay volume buys until they can get the best pricing.”
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