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SAN JOSE – The Semiconductor Industry Association today issued a revised forecast projecting worldwide sales of semiconductors will grow 6% in 2005 to a record $226 billion. The previous forecast, issued in November, projected flat 2005 sales.

"Worldwide sales of semiconductors have been stronger than expected through the first quarter,” said SIA president George Scalise, “driven by better than expected demand in a number of important end markets, including personal computers and wireless handsets."

The new forecast projects a compound annual growth rate of 9.8%  through 2008. That projects global chip sales will reach $309 billion in 2008.

Scalise said the November forecast factored in high energy prices and lingering excess inventories, fears that "have not materialized."

However, factory utilization rates have declined steadily over the past three quarters, and was was 85% in Q1, down 1 point from the fourth quarter. Recent projections from the two leading foundry companies project an increase in utilization in the third quarter.

Consumer electronics are behind the spike in sales, SIA said, citing a recent report by the Consumer Electronics Association. Purchases of consumer electronics devices per household, which rose 11% last year, is forecast to grow another 11% in 2005.

Scalise also noted that the industry responded very quickly to reports of excess semiconductor inventories in the supply chain in the third quarter of 2004.

“At the end of 2000, there was $15 billion worth of excess inventory in the supply chain – the equivalent of one month’s revenues for the worldwide industry at the time,” Scalise said. “It took until 2003 to work off this inventory. In 2004 ... excess inventories never got above $1.5 billion."

Inventories are "no longer a factor in our outlook,” he added. 

Key drivers of semiconductor growth in 2005 are forecasted to be cellular telephones, personal computers, digital televisions, and digital cameras. “Fourth quarter sales of cell phones were much stronger than anticipated,” said Scalise. “We now expect that cellphone sales will grow by 13% off a substantially larger base number. Our forecast for personal computer sales growth is unchanged at 10%, but unit sales in 2004 were 3 million above our earlier forecast. We have increased our growth forecast for digital TV sales from 50% to 65%, and for digital cameras from 6% to 15%.

The revised forecast projects sales of $226 billion in 2005, $246 billion in 2006, $273 billion in 2007, and $309 billion in 2008.

Asia-Pacific will continue to be the fastest-growing market and is projected to reach 46% of the worldwide market in 2008.

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