SIA Sees Chip Glut Easing

Worldwide sales dipped 0.5% sequentially in January but grew 17.5% year over year.
By TSC Staff ,

Semiconductor manufacturers appear to be gaining in their ongoing battle with bloated inventories, an industry group said Thursday.

The Semiconductor Industry Association, in a report on January chip sales, said the yearlong supply glut is being sold down and shouldn't be a factor in the sector's near-term growth.

"The excess inventories that slowed growth in the second half of 2004 have been largely depleted," the SIA said in a release, citing statistics that put excess inventory at $1 billion at 2004's end. "In some market segments, inventories are now below target levels, thus we are confident that inventory issues will not be a significant factor in semiconductor sales beyond the first quarter."

According to the SIA, worldwide microchip sales were $18.2 billion in January, down 0.5% from December but up 17.5% from $15.6 billion in January 2004. The group noted January is usually seasonally weak.

"The modest sequential sales decline of one-half of one percent in January is an encouraging sign," the group said. The SIA said it's encouraged by fourth-quarter gross domestic product growth of 3.8%, saying anything over 3% is usually bullish for the industry.

The group said overall factory utilization was 86% in the fourth quarter, down sequentially, while "leading-edge capacity utilization" was at 93%. Industry capital spending rose to about $47 billion in 2004, or about 22% of total sales.

"In a year of record industry sales, this level of capital spending is in line with capacity needs going forward and should not lead to either excess capacity or severe price pressures," the group said.

Among major chip stocks Thursday,

Intel

(INTC) - Get Report

was up 3 cents in premarket trading,

Atmel

(ATML)

fell 5 cents,

Micron

(MU) - Get Report

fell 7 cents and

Sun

(SUNW) - Get Report

was unchanged. The

Semiconductor HOLDRs

(SMH) - Get Report

basket fell 0.1%.

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