Chip sales show signs of life

The semiconductor industry continued its modest recovery in June, but PCs played only a small role - and European sales were left high and dry

Semiconductor sales continued to grow steadily in June, with a fourth consecutive month of growth. Sales were in line with the forecasts of the Semiconductor Industry Association (SIA) -- good news for those seeking signs of an IT industry recovery.

Worldwide sales reached $12.54bn (£7.9bn) in June, up from May's $12.49bn, led by growth in Japan and Asia Pacific, the SIA said on Monday. Sales totalled $37.6bn for the second quarter of the year, up 3.2 percent from the first quarter's $36.4bn, and a 10.4 percent rise from the second quarter of last year.

IT hardware sales have suffered through a prolonged downturn since the explosive growth of the late 1990s, with many PC vendors predicting that sales will stick to growth rates in the single digits for the forseeable future.

PCs showed relatively sluggish growth for the second quarter, rising to just under 8 percent from the same quarter of 2002, which supported 8.2 percent growth for microprocessors. Other sectors grew much more quickly year-over-year, with demand for broadband services sparking a 27.1 percent increase in the programmable logic devices used in DSL and cable-modem products. Optoelectronics grew 33.9 percent due to strong sales of optical consumer devices such as DVDs and digital cameras, while flash memory, typically used in consumer electronics and mobile phones, was up 37.1 percent year on year.

Europe did not take part in the rising sales, with sales down sequentially 4.1 percent for Q2, due to slow economic growth and outsourcing to Asia, the SIA said. In Japan sales grew 5.3 percent quarter-on-quarter, Asia Pacific was up 5.9 percent, and the Americas was up 3.6 percent.

In another positive sign, the organisation said that vendors have reduced excess inventory in the supply chain to low levels. "Now that inventory has been worked off, increasing demand as the year progresses will directly generate rising semiconductor sales," said SIA President George Scalise in a statement.

The group is projecting growth of 10.1 percent for this year, 16.8 percent for 2004, 5.8 percent in 2005, and 7 percent in 2006. The SIA said it expects industry sales to grow from $141bn last year to $205bn in 2006.

The SIA uses a three-month moving average to account for differences in companies' financial reporting calendars when compiling its monthly figures.

CNET's John Spooner contributed to this report.