Chips Soar on Gadget Sales

Apparently, some like it smart.

A report Monday from the Semiconductor Industry Association (SIA) says that sales of chips for January were up 27% from the year before, ringing in $12.28 billion to $15.5 billion globally. Sequential sales from December to January, however, slipped 3%, which the SIA attributed to seasonality.

The annual gain was driven mostly from increased production in China and throughout Asia. The tepid manufacturing pace is expected to continue throughout 2004, with sales predicted to be 19% higher than last year. The SIA report said the communications, computer, and consumer sectors will drive increased demand.

Elaborating on the data, an SIA official noted that, while computers still account for between 30% and 40% of global chip sales, it's our appetite for clever devices that is fueling the growth. Consumer-oriented gear accounts for between 15% and 18% of worldwide semiconductor sales, and sector demand is rising more than 20% annually.

That's great news for gadget makers. New DVD players and the TiVO (Nasdaq: TIVO  ) digital video recorder are catching on -- and consuming chips in record numbers. Newer mobile phones from Nokia (NYSE: NOK  ) , South Korea's Samsung, and Motorola (NYSE: MOT  ) are also generating demand, as are personal digital assistants from palmOne (Nasdaq: PALM  ) and counterparts powered by Microsoft's (Nasdaq: MSFT  ) Windows Mobile.

This isn't to suggest that the chip industry is moving away from computing stalwarts Intel (Nasdaq: INTC  ) and Advanced Micro Devices (NYSE: AMD  ) . Hardly. But increased demand in consumer devices and in other sectors such as automotive -- yep, we drive smarter cars, too -- could benefit several of the lesser-knowns, including Motley Fool Stock Advisor pick ARM Holdings (Nasdaq: ARMHY  ) , Infineon Technologies (NYSE: IFX  ) , and memory maker Rambus (Nasdaq: RMBS  ) .

Where's the money to be made? With so many chip makers out there, it's probably too early to tell. But that hasn't cooled debate at the Semiconductor Industry discussion board. As you ponder the SIA's report, you may want to grab your own bag of chips, pour yourself some salsa, and join in all the talk.

TiVO and ARM Holdings are just two of David Gardner's picks forMotley Fool Stock Advisormembers. His selections are slapping the market silly, up an average of more than 70% since the newsletter began. Brother Tom Gardner has also pummeled the index, delivering an average gain of better than 45%. Want to benefit from their Foolishness? Try Stock Advisor risk-free for six months.

Fool contributor Tim Beyers is perfectly content surrounded by gadgets, and he swears TiVO is magic for keeping his kids entertained. He has no stake in any of the companies mentioned here.


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