Semiconductor stocks dipped slightly Tuesday after an industry group reported that worldwide chip sales grew steadily in July but analysts raised fears about further pricing pressures on the notoriously volatile industry.
The Philadelphia Semiconductor Sector index fell $2.45 to $350.37 in regular-session trading Tuesday.
Earlier Tuesday, the Semiconductor Industry Association reported that chip sales in July rose to $22.2 billion, a 7.6 percent increase over last year and up 2.8 percent from June. Strong sales of personal computers and cell phones, which account for about 80 percent of chip demand, helped drive overall sales higher.
As expected, the prices for certain types of memory chips called DRAM and NAND flash memory continued to fall, reducing the overall dollar value those chips brought in during the latest period.
Analysts Gary Mobley and Auguste Richard with Piper Jaffray & Co. said in a note to clients Tuesday that "continued pricing pressure in memory and an unusual drop in microprocessor average selling prices" weighed on the chip industry during the second quarter.
They blamed the drop in microprocessor prices on a shift toward low-end laptops, which carry smaller profit margins, during the back-to-school season and cheaper graphics chips.
However, the analysts said they were optimistic that prices would remain stable into 2009 as sales continue to grow.
"From a demand perspective, it is our belief that the semiconductor industry should continue to feel the angst of slow U.S. and global economies," they wrote. "However, semiconductors are outperforming the global economy (and should continue to, in our opinion)."
The biggest gainer was Infineon Technologies AG, which makes chips for a variety of applications, whose shares rose 48 cents, or 5.6 percent, to $8.99 on speculation that memory chip maker Micron Technology Inc. might buy struggling rival Qimonda AG. Infineon owns a majority of the shares of Qimonda, a business it spun off in 2006.
Micron shares fell 2 cents to $4.22.
Qimonda shares gained 25 cents, or 12.4 percent, to $2.26.
Meanwhile, shares of Taiwan Semiconductor Manufacturing Company Ltd., which makes chips on a contract basis for other companies, fell 35 cents, or 3.6 percent, to $9.36.
Shares of Intel Corp., the world's largest computer chip maker, were down 29 cents, or 1.3 percent, to $22.58.
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