Economic uncertainty and seasonal slump knock chip sales

The semiconductor industry saw slight declines in July as a combination of seasonal slumps and low consumer confidence meant sales took a hit.

The Semiconductor Industry Association posted its worldwide sales results for the month, amounting to a total of $24.9 billion.

While this meant that month on month the sales total stayed relatively flat, with a decline of 0.1 percent, other than positive results for Japan many regions saw continued declines.

Japan saw an increase of 4.9 percent to reach $3.47 billion, up from $3.30 billion the previous month, but Europe and the Americas both posted declines.

In the Americas there was a 1.4 percent decline month on month, meaning a total of $4.64 billion, while Europe saw a 2.4 percent drop in sales to $3.13 billion.  Asia Pacific also saw a slight decline of 0.4 percent to $13.62 billion.

Taken over a three month total there was a decline of 1.8 percent from $25.30 billion to $24.85 billion.

There was also a drop in overall sales from the same point last year, with a 1.1 percent drop from $25.12 billion to 24.85 billion.

SIA President Brian Toohey claimed that the global economic situation was to blame, with seasonal demand likely to pick up during the second half of the year.

TechEye spoke to chip industry expert Malcolm Penn at Future Horizons, who agrees that a seasonal slump and economic panic were the main reasons behind the sales declines.

“July is always one of the weakest parts of the year, so you would generally expect results to be low at this point of the year,” Penn told us.

“The real question is whether it will sustain a low level of growth in general.  This is a possibility due to the negativity, a lot of which is worry rather than actual problems.”

“Because of this economic worry there is a lack of investment and an unwillingness to make decisions.”

Penn believes that, on the consumer side for example, a slow PC market is not being helped by economic uncertainty.

“Not many people are wanting to pay out for a new PC when there is so much uncertainty. But the fundamental economic situation is strong, with people lending money and so the third and fourth quarter will be positive.  Demand doesn’t go away, hardware will be need to be replaced, it is just a case of it being delayed at the moment.”

In terms of the chip industry the problem lies in negativity about capacity when demand increases in busier seasons.

“There will be a massive scramble and the industry is not really ready for it. Capacity is still tight and it is even being cut off in some cases.”