Worldwide chip market up 11.8 per cent: SIA

Driven by resurgent demand in the Asia-Pacific region, worldwide semiconductor sales leaped 11.8 per cent year on year in May, to hit $US11.28 billion, according to a recent report by the Semiconductor Industry Association (SIA).

The US industry body predicted earlier this month that the chip market would end the year at $US140.8 billion, 12.1 per cent higher than in 1998 and the first year of double-digit growth since 1995. The market for semiconductors has been plagued by over-capacity and weak demand in recent years, experiencing its biggest ever loss last year.

The Americas saw a 11.2 per cent increase in chip sales in May, reaching $US3.6 billion, while European sales eased up 3.2 per cent to $US2.4 billion, according to the SIA.

The new numbers show an industry shifting gears into new, higher profit margin products. Sales of chips in Asia-Pacific led the way, reaching $US2.8 billion in May, or 17.9 per cent higher than in May of 1998. Japanese shipments grew 15.3 per cent over the same period a year ago to $US2.5 billion.

The increasing demand for non-DRAM (dynamic random access memory) intensive products like cell phones and audio and video products is driving the growth, according to Akira Minamikawa, an analyst at market research firm IDC Japan.

Minamikawa said that a shortage in logic chips, ASICs (application specific integrated circuits) and system LSIs (large-scale integrated circuits) has helped stabilise chip prices.

The SIA numbers still mask a tough market for DRAMs, certain versions of which have seen their prices plummet 70 per cent this year by some estimates. DRAMs are used as the main memory in PCs and other computing devices.

A number of major semiconductor makers, including NEC and Toshiba, are shifting their focus away from DRAMs and into higher value products. Toshiba last week announced that as part of a plan to buy out IBM's share of a DRAM joint venture, Toshiba will expand the venture's flash memory production.

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