Global Chip Sales Hold Up, for Now

SAN FRANCISCO -- Worldwide chip sales grew 5.5% in August to $22.7billion, as demand for PCs and cell phones continued to hold up,offsetting falling prices for memory chips.

But the numbers represent the calm before the storm,as the financial crisis gripping Wall Street went into high gear inmid-September, leading to the collapse of several major financialinstitutions and leaving consumer demand for the various electronicgoods that use chips in question.

On Wednesday, memory chip maker Micron ( MU) reported awider-than-expected loss and executives delivered a sobering outlookfor the coming holiday sales season. Instead of industrywide PCgrowth of about 10% in the fourth quarter, Micron is now expecting PCsales to be flat to up a few percentage points.

Intel ( INTC), Texas Instruments ( TXN) and most of the majorchipmakers are due to report quarterly earnings later this month,giving investors a clearer view of how demand is holding up amid thefinancial crisis.

The Philadelphia Stock Exchange Semiconductor Sector Index, an index of 18 large semiconductor stocks is off 42% from its52-week high, and slid a further 3.6% in midday trading Thursday --its lowest level since early 2003.

"With consumer purchases now driving more than half ofsemiconductor sales, consumer confidence is essential to the entiresupply chain of the global technology sector," SIA President GeorgeScalise said in a statement Thursday. "Thus it is essential forCongress to move swiftly to restore stability to the U.S. financialsystem."

According to the Semiconductor Industry Association, whichreleased the monthly tally Thursday, global semiconductor sales are up4.5% so far this year, compared to the same period one year ago, andremain on track to achieve 4.3% growth in 2008.

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