Semiconductor Group Boosts 2007 Sales Forecast

Chip sales will grow 3.8% this year, it says.
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Global chip sales will grow slightly faster than expected this year, and increase 7.7% in 2008, as consumers continue to snap up electronic gadgets.

The Semiconductor Industry Association said Wednesday that demand for PCs, cell phones and digital TVs remains strong, despite rising energy costs and other economic concerns. That's helping the chipmakers who supply the integrated circuits at the heart of those devices.

"The increasing proliferation of semiconductors into an ever-broader range of consumer products coupled with the emergence of large new consumer markets in Asia, Eastern Europe and South America will be the principal drivers of industry growth for the next several years," SIA President George Scalise said in a statement.

The group predicted that worldwide chip sales will total $257.1 billion in 2007, up 3.8% year over year -- an improvement over the SIA's June forecast of only 1.8% growth in 2007.

Of course, the latest outlook is still less rosy than the double-digit growth expectations of a year ago.

At that time, the SIA projected that chip sales would jump 10% in 2007 and 10.8% in 2008.

The cause of the reduced expectations is pricing, particularly in the market for DRAM memory chips and flash memory.

According to Gartner, an industry research firm, the prices for certain types of DRAM chips have plunged 82% since the start of 2007.

On Wednesday, German chip firm

Infineon

(IFX)

reported that it lost 280 million euros ($409 million) in its fiscal fourth quarter due to its 86% stake in DRAM-maker

Qimonda

(QI)

, which the company spun off in 2006.

The SIA flagged DRAM as the dog of the chip industry, with a meager 1.5% compound annual growth rate through 2010.

Yet flash memory, which is used in MP3 players, digital cameras and cell phones, was flagged as the chip industry's fastest grower, with a 20% compound annual growth rate through 2010.

Microprocessors made by

Intel

(INTL) - Get Report

and

Advanced Micro Devices

(AMD) - Get Report

were forecast to grow 8.1% during that timeframe.