Do Chip Sales Signal a Turn?

Global chip sales rose modestly in March over February. Does this mean the economy is on the mend?

Further evidence that a tech sector recovery, however weak, is beginning to take place came from the Semiconductor Industry Association, which reported that global chip sales rose 3.3 percent in March over February.

However, it's not party time just yet. Because January was such a disaster, and February not much better, the SIA reports Q1 2009 sales were $44 billion, down 30 percent from $62.8 billion in the first quarter of 2008, and down 15.7 percent from the fourth quarter 2008 sales of $52.2 billion.

The $14.7 billion in March, a modest uptick from the $14.2 billion in February, comes across all regions except Japan, which is being hit with a very hard economic downturn.

Chip sales are considered a leading indicator of the health of the tech sector, since everything is built on semiconductors. Every desktop, laptop, server or smartphone has a number of chips in it. If sales can continue to bounce back, that would be a leading indicator of recovery.

However, a number of market researchers, including SIA and iSuppli as well as Gartner, IDC and In-Stat have all said it would be years before the market recovers to 2007 levels.

The first hints of recovery came earlier this month when Intel (NASDAQ: INTC) chief executive Paul Otellini said during the company's conference call to discuss earnings that sales picked up during the quarter. By March, he said Intel was actually getting expedited orders, meaning customers were asking them to hurry with the delivery.

"The modest sequential rebound in worldwide sales in March suggests that demand has stabilized somewhat, albeit at substantially lower levels than last year," said SIA President George Scalise in a statement.

"There are some bright spots such as smartphones and netbook PCs, but there are no clear signs of early firming of demand in other major end markets such as automotive, corporate information technology, and consumer electronics," he added.

Scalise also said he expected global stimulus packages by various governments would begin to take effect beginning in 2010.

Article courtesy of

Tags: server, consumer, smartphones, chips, Intel

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