Phones and flat-screen TVs drive chip sales

Fashionable high-tech gadgets including mobile phones and flat-screen TVs will drive greater than expected semiconductor sales during the next 18 months, new research predicts.

"We think the drivers of market growth will be Nand Flash memory on the product side, and mobile phones and flat-screen TVs on the application side," analysts from Japan's Nomura Securities wrote in a market research report released on Monday. 

The value of semiconductor shipments worldwide will grow 6.9 per cent this year and 10.3 per cent in 2007, the report's authors predict. The new figures are significantly higher than earlier estimates.

However, other sources noted that there is still great uncertainty about the demand for chips to be used in some future products.

Among them are Sony's next-generation handheld gaming platform, which is expected to be a major user of Nand Flash memory next year. 

Specifications for the unnamed successor to the popular PlayStation Portable are currently a matter of rumour.

"The market has been jittery over rumours that Samsung's supply of Flash chips for Sony's 'PlayStation Portable 2' could be cancelled or delayed. The Flash supply was previously expected to take up around eight per cent of the total Flash market," said Jay Kim of Hyundai Securities in Seoul. 

Kim acknowledged that there would be some impact on Flash chip supply if Sony decided to reduce its Flash memory demand by equipping the 'PlayStation Portable 2' with a hard disk drive.

However, the analyst noted that Sony is probably using the issue as a bargaining counter in negotiations with Samsung over memory pricing, and suggested that the market could be overreacting.

Among the key factors driving increased chip sales is a projected 15 per cent increase in the number of mobile phones sold this year, and around 10 per cent in subsequent years, Nomura's researchers forecast.

Flat screen TVs, which use more semiconductors than traditional models, and other next-generation video game consoles are also key demand drivers.

Despite the overall upwards trend, Nomura warned that a slowdown in the personal computer market, combined with excess chip inventory, could cause chip shipments to fall temporarily at the end of this year.

Although sales of PCs are now increasing more slowly than those of some other consumer electronics products, such as mobile phones, manufacturers of PCs and peripherals remain the largest single market for chips.

Nomura expects the dip in PC growth to be a brief, caused by a drop in sales of replacement PCs as users wait for Microsoft's new Windows Vista operating system. 

Shipments of PCs are predicted to increase 8.9 per cent this year, and more than 10 per cent next year, in volume terms.