Demand for PCs drives record global chip sales

As semiconductor technology progresses, functionality increases and prices are slashed

George Scalise: Semiconductors become faster, smaller and cheaper each year

Global sales of semiconductors have risen for the sixth consecutive year, according to a report by the Semiconductor Industry Association (SIA).

Sales revenues reached a record $255.6bn (£129.9bn) in 2007, a 3.2 per cent increase from the $247.7bn reported in 2006.

Worldwide sales in December were $22.3bn, an increase of 2.5 per cent compared with the $21.7bn reported in December 2006.

The SIA attributes these bullish sales to healthy demand for PCs. “The major drivers of demand for semiconductors ­ personal computers, mobile handsets and consumer electronics ­ remained strong in 2007,” said SIA president George Scalise.

Shipments of personal computers, which account for approximately 40 per cent of all semiconductor consumption, grew by 13.8 per cent and will grow by 12.2 per cent in 2008, according to JPMorgan figures.

Mobile PC unit sales grew 32.2 per cent while desktop unit sales grew by 4.1 per cent.
According to JPMorgan, mobile phone unit shipments grew by 20 per cent to nearly 1.2 billion in 2007.

Current forecasts project 10 to 15 per cent growth in unit shipments in 2008.
“Industry revenue figures tend to mask the growing pervasiveness and economic contributions of semiconductors,” said Scalise.

“The most dramatic example of how advances in chip technology are benefiting consumers is the enormous increase in performance of a typical PC system coupled with a steep decline in prices, primarily driven by semiconductors that are faster, smaller and cheaper with each year.”

Scalise continued: “The typical desktop system of 2007 was at least 100 times more powerful than the typical system of 1997, but cost about one-third as much ­ $630 in 2007 compared with $1,833 in 1997.

“Fast-declining prices coupled with increases in performance and functionality provide consumers with extra computing power at lower prices, resulting in higher productivity.”

However, feedback from UK system builders was not as optimistic. “What is driving the chip market? Everything but PCs,” said Demetre Cheras, business development director at system builder Elonex.
“Gadgets, iPods and mp3s all probably play a more significant role in generating profits.”

The only way to make money from PCs these days, lamented Cheras, is to personalise a PC. “Make it pink, make it smaller or jazzier. You have to get away from the mainstream or you are up against the multinationals,” he said.