As turnaround continues, June chip sales point to tech economy recovery

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While the U.S. unemployment dashed stock market hopes of a recovery in the national economy, the bellwether semiconductor industry seems like it’s on its way to a recovery.

Chips are a leading indicator for sales of things such as computers, consumer electronics and cell phones. Some observers are predicting a second-half turnaround. Worldwide sales of chips rose 5.4 percent in May to $16.5 billion from $15.6 billion in April. Compared to a year ago, May sales were down 23.2 percent from $21.5 billion, according to the Semiconductor Industry Association.

While the year ago comparison is still weak, the month-to-month figures have now grown for the third consecutive month, said George Scalise, president of the SIA.

“The sequential monthly increases lead us to be cautiously optimistic about a return to normal seasonal patterns for the industry going forward,” Scalise said. “As consumer confidence returns and the economy resumes growth, we expect the industry to reflect those patterns.”

The chip report is a sharp contrast to yesterday’s unemployment figures, which rocked the stock market. The unemployment rate edged up to 9.5 percent in June from 9.4 percent in May, and the economy lost 467,000 jobs in June, more than the 322,000 in May. It showed that the longest recession since the 1930s has yet to release its hold, the New York Times reported.

The stock market has been steadily rising since the Obama administration pushed through the $787 billion stimulus plan, but joblessness has remained stubbornly high. Yesterday, the S&P 500 stock market index fell 2 percent after the unemployment news surfaced. About 6.5 million jobs have been lost since the beginning of the recession in the fall of 2007. That’s equal to the net job gains over the previous nine years.

If the labor market continues to weaken, it could threaten the tech economy, which hasn’t been hit as hard compared to the 2001 post-9/11 crash. More than half of all chip sales now go into products for consumers. For all of 2009, the SIA is predicting sales will drop 21 percent.


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