Report: Chip sales to grow--till 2006

Worldwide chip sales are expected to rise 16.7 percent in 2003, largely driven by an anticipated upturn in business spending, according to a report released Tuesday by In-Stat/MDR.

Global chip revenue should bring in $164.2 billion this year, with most of the growth occurring in the second half of the year, the report says. The anticipated double-digit growth is in stark contrast to the meager 1.3 percent revenue growth that the industry fared last year, when a surge in DRAM (dynamic RAM) sales helped the industry to post positive growth, according to Steve Cullen, an In-Stat research director.

Although a chip recovery is predicted this year, Cullen said he remains cautiously optimistic.

"Over the last couple of quarters, business spending was affected by the questions 'Will there be a war?' to 'When will the war begin?' to 'How long will the war last?'" Cullen said. "By all rational expectations, most fears have been (alleviated). However, if the recovery is delayed by a quarter, it can affect the year's results."

The sales are expected to continue increasing over the next two years, with a 25 percent year-over-year rise forecast for 2004 and another climb--of 13.5 percent--in 2005, Cullen said.

Sales will likely slow during the second half of 2005, however, as the industry becomes saddled with overcapacity, he noted. That will drive average selling prices down and is expected to result in a revenue decline of 10.6 percent in 2006.

Meanwhile, other industry watchers, such as the Semiconductor Industry Association, also anticipates growth this year. The SIA forecasts a 20 percent increase in chip sales for 2003. Earlier this week, the group said chip sales rose 2.6 percent sequentially to $12.1 billion for the month of March.