 The demand for mobile phones is exceeding projections for the year, fuelled by strong demand in China, according to the Semiconductor Industry Association (SIA). First quarter 2006 worldwide sales of semiconductors came in at 7.3 percent higher than first quarter of 2005, reaching $59.1 billion.
"Very strong sales of cell phones were a major contributor to the year-on-year increase in microchip sales," said SIA President George Scalise. "Cell phone unit sales increased by 31 percent from the first quarter of 2005 and ran substantially ahead of expectations. Unit sales are now expected to reach one billion this year. According to iSuppli, the average semiconductor content of a cell phone is now approximately $41 per unit. Cell phones now represent the second-largest market, after personal computers, for semiconductors. Cell phones and PCs now account for more than half of all semiconductor sales." China is adding 5 million new mobile phone subscribers per month and currently has 410 million subscribers, according to the SIA. Demand for PC's is also contributing to sustained consumer spending on electronics. PC sales in the first quarter increase 13 percent compared to the same quarter of 2005, as noted by IDC, a market research firm. "Competition in the PC market was very intense in the first quarter of 2006, with the result that consumers are finding extremely powerful notebook and desktop systems available at very attractive prices," stated Scalise. Microprocessor sales in the first quarter of 2006 were $8.83 billion compared to $8.28 billion in 2005, an increase of 6.8 percent. However, the competitive landscape is seeing PC prices decline more than the historical 10 percent per annum level. First-quarter sales actually declined by 1.3 percent from the fourth quarter of 2005, when sales were $59.9 billion. The SIA said the sequential decline reflected normal seasonal patterns. The SIA noted that it was concerned with growing levels of inventory in certain product areas, but was not specific. However, Intel Corp acknowledged in its reporting of 1Q06 financial figures that its own inventory levels were above $3 billion US dollars and would continue to rise for several quarters. Concern surrounding a continued increase in petrol prices that could impact consumer spending in the USA was also cited. 
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