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Semiconductor Growth in 2011 May Be Stronger than Expected

Global semiconductor sales in January totaled $25.5 billion, a 14 percent increase compared to January 2010, according to the Semiconductor Industry Association (SIA). January chip sales increased 1.5 percent from December 2010, when sales totaled $22.4 billion.

SIA President Brian Toohey said growth in January reflects increasing semiconductor content in a wide range of products. "The impressive growth in semiconductor sales over the past year has been driven by strong demand across all major end markets as the products we use everyday become smarter, faster, and less expensive," Toohey said. "We are especially encouraged by this trend in the industrial and automotive sectors, which saw significant growth."

Chip sales to the industrial segment increased 50 percent, while sales to automotive grew 33 percent, according to the SIA. The integration of energy efficient tools and increased automation in industrial applications account for some of the growth in the industrial sector, the SIA reported.

In the automotive sector, increased demand for semiconductor enabled technologies can be attributed to emerging hybrid and electric vehicles, entertainment applications, engine controls, and navigation systems, according to the SIA.

The integration of semiconductors has increased across all other segments, including consumer, computer, communications and government, the SIA reported.

Chip industry researcher IC Insights based in Scottsdale, Ariz. said the strong chip demand in January and other economic data suggests that semiconductor industry will post stronger growth than many industry analysts forecast. For instance, the U.S. unemployment rate fell to 8.9 percent in January. Meanwhile, orders to U.S. factories climbed 3.1 percent in January, which is the highest growth in more than four years. In addition, the global purchasing managers' index (PMI) figure remains well above 50. A recovering economy will help drive growth in the semiconductor industry, according to IC Insights.

However, IC Insights noted that there is a "wildcard" that may have a negative impact on the overall economy and the semiconductor industry: the price of oil. If the price per barrel of oil averages around $100 or less in 2011, the integrated circuit market will see at least 10 percent growth this year. However, if oil prices surge past $100 and stay there, there will be added pressure on consumers and businesses, possibly dampening the current global economic recovery.