DRAM Bolsters Chip Sales

Industry revenue should surpass $260 billion this year.
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Advanced Micro Devices

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cracked the top-10 list of the world's biggest semiconductor companies for the first time in 2006, while strong memory and wireless chip sales boosted industry revenue 11% year over year.

Worldwide chip sales will total $261.4 billion this year, according to preliminary results from industry research firm Gartner. That's up from $234.8 billion the preceding year.

Although October chip sales were somewhat soft, and there are still several weeks to go in the crucial holiday season, Gartner said it expects consumer electronics sales and demand for DRAM memory to hold steady for the remainder of the year.

DRAM, which is used in PCs and cell phones, was a star of the chip business this year, as the requirements of

Microsoft's

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forthcoming Vista operating system prompted PC vendors to build machines packing more memory.

"Strong growth in DRAM picked up in 2006 where NAND flash left off the year before," said Gartner Research Director Jeremy Donovan.

Japan's

Elpida Memory

outgrew its peers by 45.3%, as the company beefed up its internal DRAM manufacturing capacity and strengthened ties with third-party manufacturers. Elpida's market share gain was also "made easier because the major DRAM vendors, such as

Samsung

and

Hynix Semiconductor

, focused on the higher-bit growth NAND flash market," said Donovan.

On Thursday, Elpida announced a joint venture with

Powerchip Semiconductor

in which the two companies will build four DRAM factories in Taiwan, in a bid to unseat Samsung as the world's largest manufacturer of PC DRAM.

Longtime U.S. memory vendor

Micron

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underperformed its peers by 12.8%, as the company's diversification efforts caused it to miss out on the DRAM boom.

Intel

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clung to its 15-year reign as top dog in the chip business, despite the fact that the company's revenue declined nearly 10% in 2006.

AMD was the ninth-largest chip firm by revenue this year, up from the 14th spot a year earlier. Gartner included full year-revenue of graphics chipmaker

ATI

, which AMD

acquired in November, in calculating the ranking.

Rising semiconductor stockpiles among distributors have

pressured sales in recent months, causing many chipmakers to pare back their sales forecasts.

According to Gartner, strong sales of consumer electronics during the holidays and reductions in factory output should bring chip-inventory levels back to normal by the end of the first quarter of 2007 -- one quarter earlier than during the semiconductor industry downturn that occurred in 2004 and 2005.

Gartner predicted that chip sales in 2007 will increase by a high-single digit percentage.