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DRAM Price Drops Hide Global Demand for Chips
DRAM Price Drops Hide Global Demand for Chips
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The Semiconductor Industry Association reports that global semiconductor sales in February rose 1.5 percent from the year-earlier period to reach $20.44 billion. Though chip revenues fell 4.9 percent from January, the result was in line with normal seasonal patterns, the trade group said.

"Excluding memory products, worldwide semiconductor sales grew by nearly 10 percent year-on-year," noted SIA President George Scalise. Even better, total unit shipments for all semiconductor products "increased by 11.6 percent year-on-year, indicating strength in the end markets that drive demand for microchips," Scalise said.

DRAM's Drag

Despite a slowing U.S. economy, markets outside North America continued to show robust growth in demand for electronic products that drive semiconductor sales, the SIA said. However, the underlying strength in the month's global chip sales was masked by a continued decline in the price of DRAM memory chips, Scalise said.

"DRAM revenues declined by more than 40 percent year-on-year despite a 43 percent increase in unit shipments" and "average selling prices for DRAM chips declined by nearly 60 percent year-on-year," Scalise explained.

The SIA's latest report suggests that the surprising weakness in memory-chip sales that occurred in the fourth quarter is continuing to take the wind out of global chip sales. According to researchers at iSuppli, global DRAM revenue unexpectedly tanked 19.1 percent in last year's fourth quarter, exceeding the research firm's expectation of a 4.7 percent decline.

Moreover, NAND-flash revenue declined 3.9 percent in last year's fourth quarter, causing memory-chip revenue to decline 11 percent overall, iSuppli said. "This was a complete role reversal for memory semiconductors compared to 2006," when memory-chip "revenues helped to prop up the growth of the overall semiconductor industry," observed iSuppli Senior Vice President Dale Ford.

The poor results for memory chips in 2007 ended up restraining market growth, the iSuppli analyst said. "If memory were excluded from the revenue total, the semiconductor market would have grown by 2.4 percent in the fourth quarter," Ford said. "However, due to the influence of the weak memory market, total semiconductor market revenues fell by 0.5 percent in the fourth quarter."

Strong PC and Handset Sales

Chip sales during February in Japan and the Asia-Pacific region grew 8.2 percent and 1.2 percent, respectively, the SIA said. By contrast, semiconductor sales fell 3.5 percent in the Americas and declined 0.1 percent in Europe. In addition, chip sales in the rest of the world, including Eastern Europe, Africa and South America, "equaled the number of units sold in the U.S. in 2007 and is poised to surpass the U.S. market in PC unit sales this year," Scalise said.

Recent research reports from J.P. Morgan and Gartner point to strong international sales of PCs and mobile handsets in international markets, Scalise noted. In particular, the Asia-Pacific region has overtaken the U.S. as the largest market for PCs, he said.

"In handsets, the growth in international markets is even more dramatic, especially in the Asia-Pacific region," Scalise noted. "Unit shipments of handsets in the Asia-Pacific region will reach almost 540 million units in 2008 -- over three times more than the 161.6 million units they expect will be sold in the U.S.," he said.

In North America, the negative effects of high energy prices as well as the turmoil in the U.S. housing market have acted to reduce the discretionary spending of American consumers, Scalise said.

"While any decline in U.S. consumer spending has an effect on offshore electronics manufacturers, the rapid growth of sales of consumer electronics in other markets is continuing to create opportunities for semiconductor manufacturers," Scalise said.

Read more on: Chips, SIA, DRAM
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