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Semiconductor Group Cuts Global Sales Forecast

The Semiconductor Industry Association on Wednesday cut its forecast for growth in global sales of semiconductors in 2008, citing lower prices due to competition in the memory chip sector.

The trade group said it now expects 2008 chip sales to grow 4.3 percent to $266.6 billion, down from a growth forecast of 7.7 percent issued last November.

In a mid-year update to its annual forecast, SIA also said it expects chip sales to show a compound annual growth rate of 6.1 percent through 2011.

The slower growth for 2008 is expected despite healthy demand for products like mobile phones and personal computers, it said.

"DRAM (memory chips) revenue declined by 34 percent even as unit shipments increased by more than 30 percent in the first four months of 2008 compared to the same period last year," George Scalise, SIA president, said in a statement.

The group said unit sales of PCs are on pace to grow 10 percent this year to about 300 million, while mobile phone unit shipments are expected to grow 12 percent to more than 1.3 billion.

Excluding memory products, semiconductor sales are expected to grow by 7.4 percent this year. Despite a slowing U.S. economy, sales are likely to be buoyed by increasing sales of consumer products in international markets such as China and India.

Revenue from sales of microprocessors, which accounts for 14 percent of semiconductor revenue, is expected to grow more than 10 percent annually for the next two years, SIA said. Microprocessors are like the "electronic brains" of devices such as PCs and video gaming consoles.

With the chip industry increasingly driven by sales of consumer electronics, SIA said it was closely watching developments that impact discretionary consumer spending, such as rising energy and food costs.

The Philadelphia Stock Exchange Semiconductor Index declined 1.2 percent in Wednesday morning trade. Through Tuesday, the index had fallen 3 percent this year, compared with a 7.6 percent drop for the Nasdaq.