Chip sales up in August, inventories seen dropping

Global semiconductor sales rose 1.1 percent, to $18.2 billion, in August from the previous month and it appears as though chip inventories are declining, an industry trade group said on Thursday.
August's sales were up 34 percent from the year before, led by chips for personal computers and equipment for networking and telecommunications, said the Semiconductor Industry Association, which prepares the data on a three months rolling average basis. It said sales growth for the year is still expected to meet the current forecast of 28 percent.
Weakening demand in some product segments and regions have led to a build-up in semiconductor inventories, prompting a spate of lowered sales forecasts from major players across the industry, including Intel Corp, Texas Instruments Inc and Xilinx Inc.
Wedbush Morgan analyst David Wu said the SIA's next monthly update would likely show a sequential decline as July, which was a weak month for chip sales, is added to the three-month average and June, a stronger month is taken out.
"In September I think you will see sequentially down numbers because you would drop out June and add in July and September," said Wu, who also forecast that September would not show much improvement from July and August.
But the trade group said that unlike in previous cycles, chip makers and consumers have responded quickly to the inventory build-up, by cutting production.
"In previous market cycles, it has generally taken several quarters for the supply chain to take corrective action," SIA President George Scalise said in a statement. This time, however, industry researchers are reporting that inventory levels, which began building in the second quarter, are already starting to decline.
The group said it expects factory utilisation to decline in the current quarter from 95 percent during the second quarter. "At this time, we do not believe overcapacity will be a major concern in 2005," the group said. The European Semiconductor Industry Association (ESIA) said European chip sales rose 1.6 percent in August.
Semiconductor stocks have been whipsawing for the better part of the last three months. Since the beginning of July, shares fell as much 28 percent, before rebounding in early September. Since then, shares had recovered 16 percent of those losses only to give back 6 percent in the last week and a half.