For First Time Since 2005, Growth In Semi Capacity Less Than In End Demand

According to data released today by the Semiconductor Industry Association:

Worldwide sales of semiconductors of $20.3 billion in March were 1.0 percent higher than the $20.1 billion reported for February, and 3.2 percent higher than the $19.7 billion reported for March 2006, the Semiconductor Industry Association [SIA] reported today. First-quarter global chip sales amounted to $61.0 billion, an increase of 3.2 percent from the $59.1 billion reported for the first quarter of 2006. Sales declined by 6.5 percent in the first quarter of 2007 compared to the $65.2 billion reported for the final quarter of 2006.

Looking at a chart of the year/year growth in semiconductor industry sales, it is clear that we are seeing a significant slowdown. In fact, we would be surprised if the sales do not decline this year.

However, the industry has also slowed the pace of its orders for new semiconductor manufacturing equipment and for the first time since 2005, the growth in orders for new capacity was less than the growth in end demand. The longer this situation continues, the healthier it will be for future industry sales, pricing and profit margins.