Global Chip Industry up 9% in 2006

Worldwide sales in December were $21.7 billion, an increase of 9 percent from December 2005 when sales were $20 billion. December 2006 sales declined by 3.6 percent from the immediate-prior month, when sales were $22.5 billion. Worldwide sales in the fourth quarter were $65.2 billion, an increase of 9 percent over fourth-quarter 2005 sales of $59.9 billion and an increase of 1.9 percent over third-quarter 2006 sales of $64.0 billion. “2006 was the 'Year of the Consumer' in the electronics industry," said SIA President George Scalise (pictured). “Sales growth was largely driven by popular consumer products such as cell phones, MP3 players, and HDTV sets – all products that have proliferated as semiconductor technology has enabled dramatically lower costs coupled with improved functionality. According to iSuppli, the semiconductor content of electronic systems – as measured by cost – has been increasing steadily and now stands at 21.6 percent. “Cell phone shipments exceeded one billion units in 2006," Scalise continued. “The average semiconductor content of a cell phone fell slightly to around $40 last year, mainly due to demand for low-end phones in emerging markets. Growth of cell phone subscriptions in emerging markets continues to be strong. “More than 34 million MP3 players were sold in the U.S. in 2006. While the growth rate for MP3 players is likely to slow going forward, the semiconductor content of these devices is growing as a result of increased storage capacity and addition of new functionality such as video capability. “Preliminary estimates on worldwide personal computer sales indicate that about 235 million units were shipped in 2006. Despite a somewhat slower growth rate as a result of high penetration in some developed country markets, PCs continue to account for a significant portion of semiconductor consumption," Scalise said. “Indications are that U.S. sales of HDTV units more than doubled in 2006 driven by sharply falling prices and increasing high-definition programming. We expect demand for HDTV monitors will continue to grow sharply for the next several years." The SIA noted that favorable economic conditions in the major world markets have contributed to growth of semiconductor sales. “The GDP increase of 3.4 percent in 2006 reflected continuing strength of the U.S. economy, which is the largest market for end products. Consumer spending has been very strong, and consumer confidence is at the highest level since May of 2002. The Asia-Pacific region, in which China is the largest country market, experienced the strongest growth in semiconductor sales with a growth rate of 12.7 percent in 2006." SIA noted that capacity utilization rates remained strong throughout 2006. Strategic Marketing Associates estimates that the worldwide industry spent approximately 22 percent of revenues on capital additions in 2006. SIA commented that the current ratio of capital expenditures to sales is in line with maintaining balanced supply and demand. Scalise noted that 2006 global sales came within 0.4 percent of the SIA forecast of $248.8 billion. “With generally healthy economic conditions in all of the world's major semiconductor markets, we believe our forecast of 10 percent growth to $273.8 billion in worldwide sales in 2007 is aligned," Scalise concluded. Click here to view the SIA's webcast presentation on 2006 Year End Results and Industry Short-Term Outlook (PDF format).