Chip sales dip in October, flash sales dive

The Semiconductor Industry Association said Monday that global sales of semiconductors declined by 2.4 percent in October as memory products saw the steepest declines.

This follows an SIA report last month that said chip sales in the fourth quarter, historically a strong time period for the microelectronics industry, are expected to decline by 5.9 percent from the previous quarter.

Monday's report said that global sales of semiconductors declined by 2.4 percent in October to $22.5 billion against sales of $23.0 billion in October 2007. October sales were off by 2.1 percent compared to the $23.0 billion in September 2008.

Memory products--such as flash--have been the hardest hit and are dragging down other chip sectors. If memory is excluded, industry sales increased by 3.8 percent compared to October 2007 but declined by 1.4 percent compared to September 2008, the SIA said.

NAND flash--used in digital cameras, digital music players, and solid state drives--sales were off by nearly 41 percent in October compared to a year ago. DRAM memory was off 14 percent.

Memory manufacturers, including Micron Technology and South Korea's Hynix, have been struggling in the face of sales declines. Micron said in Ocotober that it would stop making NAND flash memory at a joint Intel-Micron facility in Boise, Idaho and cut 15 percent of its workforce. Hynix, meanwhile, has been trying to sell off a 36 percent stake in its operations.

"The slowdown in worldwide semiconductor sales that became evident in September continued in October," said SIA President George Scalise in a statement. "The worldwide financial turmoil is expected to continue to impact demand for semiconductors as we enter 2009," he said.

The SIA report last month projected that 2009 sales will decline by 5.6 percent to $246.7 billion before resuming growth in 2010, the first decline in global chip sales since 2001.

In 2009, PC unit shipments are projected to fall by 5 percent and cell phone unit shipments are expected to be down by 9 percent. These two categories account for approximately 60 percent of total demand for semiconductors, the SIA said Monday.

The world's largest chip manufacturers such as Intel and Taiwan Semiconductor Manufacturing Company (TSMC) have both said they expect a sharp drop in revenue in the fourth quarter.

The SIA reiterated what it said last month: sales were trending up until October. Sales for the first ten months of 2008 were $216 billion, an increase of 2.6 percent from the first ten months of 2007 when sales were $210 billion.