Gradual chip industry recovery in June quarter signals broader tech recovery

Global chip industry sales continued in the second quarter as sales grew 17 percent from the first quarter, according to industry trade group Semiconductor Industry Association.

The chip industry is the backbone of everything electronic and so its sales are a bellwether for the tech recovery. Revenues in the second quarter were $51.7 billion, up 17 percent from $44.2 billion the first quarter. Compared to a year ago, sales were down 20 percent from $64.7 billion.

Worldwide sales in June were $17.2 billion, up 3.7 percent from May sales of $16.6 billion and 20 percent lower than $21.6 billion in June 2008. Year-to-date sales of $95.9 billion were 25 percent below the first six months of 2008, when sales were $127.5 billion. The sales data is based on a three-month moving average.

Sales have now been up on a consecutive basis for the fourth month in a row, an indicator the industry is returning to its normal seasonal growth after taking a big dive in the recession, said George Scalise, president of the SIA.

Consensus estimates for unit sales of personal computers — a big part of overall chip demand — are now in the minus 5 percent to flat range, more optimistic than in past months when analysts predicted unit sales would fall 9 percent to 12 percent. Cell phones, another big chip category, could see unit sales declines of 7 percent to 9 percent instead of the previously forecast 15 percent. PCs and cell phones account for 60 percent of chip consumption.

Economic stimulus programs in China and investment in a new generation of cell phone infrastructure is driving demand.