January chip sales down 40 per cent from 2001

Worldwide sales of semiconductors continued to decline in January following one of the worst years yet for the industry, but signs of a recovery are beginning to emerge, an industry trade group said this week.

The combined revenue of nearly 70 global chip makers totalled $10.01 billion in January, compared with $16.63 billion in January 2001, a drop of nearly 40 per cent year over year, the Semiconductor Industry Association (SIA) reported Tuesday.

However, the sequential decline from December to January was only 1.7 per cent, slimmer than the drop that occurred from November to December. Sales in December totalled $10.18 billion.

“The figures show that, basically, the industry has bottomed out and that it is definitely working its way toward a recovery,” said Eric Rothdeutsch, an investment-banking analyst covering semiconductors for Robertson Stephens Inc.

Worldwide chip sales figures are tallied by averaging the total sales for three months, using data from the World Semiconductor Trade Statistics organization, according to Doug Andrey, an analyst with SIA, in San Jose, California. This equation is used to smooth out steep seasonal sales peaks. For example, January sales figures equal the average of sales in November, December and January, and the December figures reflect October, November and December.

The chip industry is working to bounce back from 2001, one of its worst years ever, in which worldwide market value shrunk 32 per cent compared to the booming year of 2000, the industry group said.

While the Americas posted the largest decline year over year of all regions of the world — about 52 per cent — sales were nearly flat with December. The Asia-Pacific region, not including Japan, dipped only 13 per cent in January 2002 compared to January 2001, and the region saw just a modest sales decline in January compared with December.

Market conditions were darker in Japan, where the semiconductor market declined more dramatically in January than the worldwide average. Compared to December, sales dropped 5.4 per cent in January, while year over year, chip sales in Japan fell more than 50 per cent.

Individual product segments are leading sales back, according to SIA market research. Sales of DRAM (Dynamic RAM) chips, used mainly in PCs and video game consoles, grew a surprising 24 per cent in January compared to the previous month, SIA said.

“That’s a very good sign of a recovery,” Andrey said.

Much of the gain in DRAM revenue had to do with a boost in the price of the memory chips, Andrey said. After DRAM bottomed out in October, an increase in demand for DRAM sent spot market prices soaring to as much as triple the earlier price.

“Manufacturers have really scaled back production, bringing supply back with demand,” Rothdeutsch said.

Meanwhile, sales of “commodity memory” such as the flash memory chips used in cell phones, aren’t expected to take part in the overall industry recovery, as price wars continue to erode the market, analysts said.

SIA predicted that worldwide chip sales would experience 1 per cent growth, if any, during the first three months of the year.

The SIA is based in San Jose, California, and can be reached at +1-408-436-6600 or on the Web athttp://www.semichips.org/