Worldwide Chip Sales Up 7.5 Percent in May

Business Wire, June 30, 2008

Chip Sales up 2.8 Percent from April

SAN JOSE, Calif. -- Worldwide sales of semiconductors of $21.8 billion in May were 7.5 percent higher than the $20.3 billion reported for May 2007, the Semiconductor Industry Association (SIA) reported today. May sales were 2.8 percent higher than the $21.2 billion reported for April 2008. Year-to-date sales of $103.4 billion are up by 5.3 percent from the $98.2 billion reported for the first five months of 2007. Total semiconductor sales excluding memory products were up by 12.3 percent year-on-year and by 2.5 percent sequentially. SIA noted that May is historically a relatively strong month for semiconductor sales.

"Global sales of semiconductors grew at a healthy rate in May reflecting continued strong sales of consumer electronic products," said SIA President George Scalise. "Despite reports of declining consumer confidence in the U.S., both disposable income and consumer spending rose in May. It is likely that the distribution of tax rebate checks to millions of Americans was a factor in increased consumer spending."

"Growing sales of consumer electronic products in emerging markets, including China, Latin America, and India, have become a major factor driving semiconductor sales," Scalise continued. "Consumers account for more than half of all semiconductor sales worldwide. In the past, the US was the largest consumer market and the primary driver of demand. Today this country accounts for less than a quarter of total consumer demand," Scalise noted. Factors affecting the world economy - rather than just developed country markets - are increasingly important to the industry. While the surge in energy prices has caused widespread concern, according to JPMorgan trade flows indicate that developing countries - especially Asian countries - have benefited from increased trade with OPEC nations, which in turn has helped to expand consumer markets in these countries.

"Until recently, the U.S. accounted for approximately 31 percent of PC unit sales. Today, with the growth of the consumer base in emerging markets, the U.S. accounts for around 21 percent of PC unit sales. Five years ago, the U.S accounted for 21 percent of cell phone unit sales, and in 2008 that figure will be 13 percent. "

According to Scalise, the shift in demand patterns has major implications for the semiconductor industry. "While we haven't seen a slowdown in U.S. consumer spending on electronic products, a slowdown in the U.S. today would not have the same impact it had in the past," said Scalise. "The addition of more than 300 million consumers in other regions has created new opportunities for the worldwide microchip industry, and a more diversified market has helped to drive increased sales of semiconductors."

Unit demand for memory chips continues to be strong. Micron estimates that the DRAM bit content of an average personal computer will grow by approximately 50 percent in 2008 to nearly 2.0 GB per box. According to Credit Suisse, capital expenditures for DRAM capacity will slow somewhat in 2008, bringing supply and demand into parity by the end of this year. DRAM sales were up sequentially by 6.4% but declined by more than 20% from May 2007.

In NAND flash, Credit Suisse estimates that total bit shipments will grow by at least 135 percent in 2008 and that supply and demand will be nearing parity by year-end. NAND flash sales grew by 1.4 percent sequentially and by 25.5 percent from May 2007.

About the SIA Global Sales Report

The SIA Global Sales Report (GSR) is a three-month moving average of sales activity. The GSR is tabulated by the World Semiconductor Trade Statistics (WSTS) organization, which represents approximately 66 companies. The moving average is a mathematical smoothing technique that mitigates variations due to companies' financial calendars.

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About the SIA

The SIA is the leading voice for the semiconductor industry and has represented U.S. semiconductor companies since 1977. Collectively, the chip industry employs a domestic workforce of 216,000 people. More information about the SIA can be found at www.sia-online.org.