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Sales of semiconductors worldwide are expected to grow a strong 37% this year, to $205 billion, the

Semiconductor Industry Association

forecast Thursday, although growth is expected to slow somewhat next year to 22%, reaching $249 billion in sales.

The San Jose, Calif.-based trade group put an optimistic face on its annual forecast. It projected a $319 billion market for chips within three years and a $1 trillion market within a decade, as demand is expected to remain strong for communications networks, wireless devices and personal computers.

The forecast came on what was otherwise a dismal day for many chipmakers. After

Altera

(ALTR) - Get Altair Engineering Inc. Class A Report

, a specialty chipmaker, warned late Tuesday night of sagging sales, the company's stock fell more than 20%. Shares of its chief rival,

Xilinx

(XLNX) - Get Xilinx, Inc. Report

fell nearly 7%.

Some other chip stocks also sagged as some Wall Street analysts predicted an overall slowdown in demand, especially for PCs and telecommunications equipment. The

Philadelphia Stock Exchange Semiconductor Index

fell more than 3.5%.

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Still, this year's projected growth rate in worldwide chip sales is stronger than the association's earlier forecast in June, according to

Bloomberg News

, when the SIA projected a 31% increase to sales of $195 billion.

Steve Kaufman, a spokesman for the SIA, said the trade group was projecting slower sales growth next year partly because recent monthly sales growth of 45% to 50% was considered unsustainable.

He said semiconductor industry growth cycles typically run four years, following a pattern in which growth begins to "run out of steam" in the third year and becomes "flatter" in the fourth. The industry is currently in the third year of the cycle, if that pattern holds, he said.

The association's prediction is closely watched by some investors because shortages or gluts in supply or demand for computer chips are routinely praised or blamed for the financial successes or failures of companies in a wide array of technology sectors.

Joe Moore, a semiconductor industry analyst for

Goldman Sachs

, said the trade group's predictions were somewhat more meaningful than third-party estimates.

But Moore discounted the predictions for 2002 and beyond, saying these "you wouldn't look at because nobody really knows yet."

"The big variable is pricing, and nobody has any idea what pricing is going to be," Moore said.

The association projected that chip sales in North and South America would rise 34% this year, to $64 billion, and 21% next year, to $77 billion, and would reach $96 billion in 2003.

It said the biggest growth in the current year would take place in Japan, with a 42% increase, to sales of $46 billion, and in the rest of the Asian Pacific market, where sales would rise nearly 41%, to $52 billion.

Europe, meanwhile, would see a 33% increase in sales this year, to $42 billion.