Global semiconductor sales in September grew by 4.2 per cent over August, the US Semiconductor Industry Association said recently, suggesting that the worst may be over for the world's beleaguered chip makers.
September sales reached $US10.22 billion, the highest monthly total since April and the largest such September-over-August jump in eight years, the industry group said in a statement.
"This increases our optimism for stronger-than-expected sales in the fourth quarter," said SIA president George Scalise in the statement.
Chip makers, however, are not likely to uncork the champagne just yet. On a year-on-year basis, the September worldwide sales figure was still down by 13.5 per cent from $US11.83 billion in the same month last year, with sales in Japan dipping by as much as 27.9 per cent, the SIA said.
Triggered mainly by oversupply and overcapacity on the manufacturing side rather than weakened demand for semiconductors, the current downturn in the industry looks different from previous down cycles in that it is lasting longer, noted David Wang, senior vice president of manufacturing equipment vendor Applied Materials.
The cyclical nature of the chip industry is driven by the dynamic random access memory (DRAM) segment, said Wang, in a presentation at the Semicon Taiwan '98 trade show.
"Here in Taiwan all the DRAM makers are losing money now because the market price is almost the same as the manufacturing cost," added Wang, who also serves as a board member of Semiconductor Equipment and Materials International, the organiser of the Semicon exhibition.
But the free fall in DRAM prices that started in late 1996 is finally showing signs of having bottomed out, the head of NEC's semiconductor business said in a Tokyo briefing last week.
While market researchers predict global chip sales this year will contract by as much as 8 to 10 per cent from 1997, in the long term the industry is expected to recover. Chip demand will be fuelled by sales of Internet access devices, including PCs, PDA (personal digital assistants) and set-top boxes, said many industry analysts.
"The future is still very bright," said Wang, predicting that the number of connected computers will grow from 150 million units this year to 1 billion by 2005.