In the aftermath of all the news about the U.S. credit crunch and Wall Street's financial crisis, a new report shows that sales of semiconductors grew more than 5 percent in August thanks to help from cell phone and consumer desktop and notebook sales. However, the report warns that a bailout from Congress is needed to continue the sales growth. The report precedes upcoming quarterly reports from Intel and AMD that should give better guidance.
The good news for the semiconductor industry is that sales increased
more than 5 percent in August thanks to robust sales of cellular
telephones, desktops and notebooks. The bad news is that Wall Street's
current woes could dampen the forecast for the rest of the year,
especially if consumer confidence erodes.
The report,
released by the SIA (Semiconductor Industry Association) Oct. 2,
shows sales of semiconductors increased 5.5 percent from August 2007,
when sales totaled $21.5 billion to August 2008, when the numbers
reached $22.7 billion. In 2008, semiconductor sales through August
topped $170 billion worldwide, a 4.5 percent increased from the same
time period in 2007.
While those numbers might seem a positive sign for both chip makers such as
Intel,
Advanced Micro Devices,
Samsung
and others, the SIA report did carry a cautious statement by President
George Scalise. His statement indicated there could be trouble if Wall
Street's crisis of confidence continues and consumer spending suffers
as a result.
"With consumer purchases now driving more than half of semiconductor
sales, consumer confidence is essential to the entire supply chain of
the global technology sector; thus it is essential for Congress to move
swiftly to restore stability to the U.S. financial system," Scalise
concluded.
The warning from SIA comes at a time
when
the IT industry is not sure if the fallout from the failures of Freddie
Mac (the Federal Home Loan Mortgage Corp.), Fannie Mae and Lehman
Brothers will begin to spread out from the financial and banking
industries to the wider economy. The latest rumblings on Wall Street
began in September, which means the next SIA report might offer a
better picture of how Wall Street's failures will impact the IT
industry.
The plea by SIA to the U.S. Congress for the proposed bailout plan
also shows how important sales of consumer electronics, compared to
traditional IT sales involving desktops PCs and server systems, have
become for the semiconductor industry. That point was echoed on the
GigaOM blog.
"The continued consumerization of technology - from moms keeping
their schedules on BlackBerrys to teens toting cell phones, laptops,
MP3 players and digital cameras - means more chips are selling into
gadgets than into servers," wrote Stacy Higginbotham.
Later this month, Intel and
AMD
will release their latest financial numbers and both companies serve as
a bellwether for the IT industry, especially when it comes to PC and
server sales. The numbers from the two chip companies will also offer a
glimpse into consumer confidence and show whether Wall Street's
problems have begun impacting consumer electronics sales on Main
Street.
Read about the release of the Xeon 7400 series processors-formerly code-named Dunnington-for multiprocessor server systems.
However, since most of the current problems on Wall Street began
midway through September, the impact of the last few weeks might not be
reflected on the two companies' third-quarter financial numbers. (The
sales period ended Sept. 30.) Earlier this week, a financial analyst
with Piper Jaffray wrote that Intel should hit its third-quarter
numbers.
The SIA report also found that the prices for memory, including DRAM
(dynamic RAM) and NAND flash memory continue to fall, which slowed some
chip makers down in the last few months. The continued drop in memory
prices showed up Oct. 1 when Micron Technology, one of the world's
leading producers of DRAM and NAND chips, reported a $344 million
fourth-quarter loss.
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