Driven by strong demand for consumer electronics and PCs, worldwide chip sales increased 6.8 per cent to a record US$227.5 billion in 2005 from $213.0 billion in 2004, according to the Semiconductor Industry Association (SIA).

Chip sales for December 2005 increased 8.6 per cent to $19.95 billion from the same year-ago period, the SIA said Thursday. Likewise, sales for the fourth quarter of 2005 also jumped 8.6 per cent to $59.86 billion from the same year-ago period and were up 2 per cent from third-quarter figures. Global chip sales for December did dip 2.2 per cent from November, but this trend is consistent with seasonal fluctuations leading up to the holiday shopping season, according to the SIA.

The SIA predicts worldwide chip sales will increase 7.9 per cent in 2006 to $245 billion and will reach $309 billion in 2008, driven in part by strong demand for DSPs (digital signal processors) and flash memory used in consumer electronic devices. DRAM (dynamic RAM) memory chips, however, are expected to slightly decline.

But Intel down

Despite the bullish forecast from the SIA, bellwether chip maker Intel recently reported worse-than-expected revenue for its 2005 fourth quarter as a result of desktop chip inventory problems. Intel's revenue of $10.2 billion for the quarter missed its expectations of between $10.4 billion and $10.6 billion.

Revenue was still up 6 per cent from the same year-ago period, and Intel expects inventory levels to stabilise in 2006. Advanced Micro Devices, meanwhile, beat expectations for the fourth quarter of 2005. The chip maker's revenue rose 45 per cent to $1.84 billion from the same year-ago quarter. Net profit for the quarter was $96 million.

The SIA's figures also reflect the continuing migration of electronics manufacturing to the Asia-Pacific region. Semiconductor sales in that region skyrocketed 20 per cent to $9.3 billion in December of 2005 from the same year-ago period. The region accounted for nearly 50 per cent of the global market for microchips in 2005, with China taking the lion's share.