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Chip Sales Strong

Industry group reports 5% increase in September despite fall in chip stocks.

SAN FRANCISCO -- Despite a drop in chip stocks, an industry group says semiconductor sales are getting along swimmingly.

Worldwide semiconductor sales in September increased 5% from August, to reach $22.6 billion, according to the Semiconductor Industry Association, with total sales to date in 2007 running slightly ahead of the group's expectations.

With consumer electronics makers preparing for the holiday sales season, chipmakers enjoyed the traditional surge in demand during the third quarter. Global chip sales in the third quarter increased 13.2% from the second quarter.

"The two largest demand drivers for semiconductors -- PCs and cell phones -- continue to show healthy growth," SIA president George Scalise said in a statement.

For the second consecutive month, NAND flash was the star of the chip industry, with sales up 58.5% year over year, according to the SIA. And while volatile pricing has pressured the NAND market for much of the year, the SIA said that average selling prices of NAND in the third quarter increased 32% from the second quarter.

Of course, this hasn't helped flash memory chip maker



, whose shares are down more than 16% in the past two weeks as the company has fallen victim to

the selloff plaguing the broader chip sector.

SanDisk was up 2.4% at $42.04 in midday trading Monday.

Despite strong demand for consumer electronics, chip stocks have been crushed by fears of a potential chip inventory glut, along with a slew of company-specific issues at firms including

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that have soured investors on the sector.

The Philadelphia Stock Exchange Semiconductor Sector Index, which is comprised of 19 semiconductor stocks, is down nearly 10% since the start of October.

Rising energy costs are also fanning fears of a general economic slowdown. So far, energy prices have not affected chip sales, according to the SIA's Scalise.

"This will bear watching, however, as we move into the retail selling season," he said.