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Chip Sales Set Record

Worldwide semiconductor sales were $20.5 billion in August, up 10.5% from a year earlier.

Chip sales hit a record one-month total in August, even as semiconductor inventories continue to rise.

Worldwide semiconductor sales were $20.5 billion in August, up 10.5% from the same time a year ago, and 2.5% higher than July, according to the Semiconductor Industry Association.

The previous record for chip sales in a single month was $20.4 billion in November 2005.

"Once again we saw relatively strong sales across a very broad range of semiconductor products, which reflects healthy end-markets," said SIA President George Scalise.

DRAM memory chips logged the strongest growth, with sales up 7.5% from July and 31.4% from August 2005, an indication that PC sales remain strong, according to Scalise.

Still, the average sales price of microprocessors, the brains of a PC, declined 18% year over year, as

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continue to wage a fierce price war. The price cuts resulted in a 6.8% decrease in microprocessor revenue compared to August 2005, although sales rose 2.1% sequentially.

The SIA noted the rising chip inventories that several companies have already acknowledged in earnings reports and midquarter updates earlier this summer.

"Inventories have risen both at semiconductor manufacturers and in the channel in recent months, but remain in line with requirements for the holiday build season," Scalise said.

Indeed, the report said chips geared for consumer electronics, such as NAND flash, showed strong sequential sales growth in August.

Wedbush Morgan semiconductor analyst Craig Berger wrote in a research note to investors that August chip shipments were stronger than the historical median following a weaker-than-typical June and July, reflecting the beginning of the holiday ramp-up.

"We do expect back-to-school demand and the holiday ramp to drive increased chip shipments for PCs, cellular handsets and consumer products through November," wrote Berger, who reaffirmed his outlook for 2006 chip sales to grow 9% year over year.

The SIA report didn't mention its full-year outlook. The group previously said it expected worldwide chip sales to grow 9.8% in 2006. But in the SIA's July chip-sales report, the group

gave hints that it now expects chip-sales growth to be more on the order of 6%.