War in Iraq impacts global chip sales. (First in/First Out).

Global chip sales took another hit in February as an overcast of war and a seemingly hopeless economic recovery loomed over consumers' heads. The Semiconductor Industry Association (SIA) reported worldwide semiconductor sales of $11.8 billion in February, marking a 3.3 percent decrease from the previous month's $12.2 billion dollar revenue.

For the past year, the semiconductor industry has been slowly recovering from a memorable blow in 2001 but had remained strong in 2002 with what some were calling a "turnaround year." Total revenue for the year was at $140.7 billion, marking a 1.3 percent increase from 2001. The push was triggered by a double-digit raise in handset sales in the fourth quarter, which drove a 13.2 percent jump in Flash and a 6.8 percent growth in Digital Signal Processors. New subscribers continue to set records in Asia, particularly in China, which is claiming 5 million new customers each month.

The promising trend unfortunately came to a halt in January--with a 2.4 percent decrease from the previous month--and paved the way for February's poor performance. "The recovery in the semiconductor industry that has been underway for more than fifteen months appears to have stalled in February," said SIA president George Scalise, in a statement. He went on to say that the demand for chips has cooled in the markets that drove growth throughout last year, including PCs, global wireless and consumer. He added that the traditionally flat first quarter had been amplified by the looming war, but that he expects demand to strengthen in the second half of the year for a final growth score in the double digits for the year.

This recent drop from January contradicts the 18 percent overall rise of the chip industry from a year ago, which was reported at $10 billion.

Chip vendors should rest assured, according to SIA. The extended forecast for the year remains optimistic. Analysts are still betting on a comeback in the chip sector from sales in new technology. The popularity of cell phones is expected to rise as consumers gravitate toward new mobile technology, including "smart phones" that offer digital cameras, email messaging, wireless Internet access and video games. WiFi will also contribute as it surfaces across the country in popular hangouts by way of WLANs. According to SIA, its annual growth rate is expected to exceed 35 percent over the 2000-2005 forecast period. In addition, a rise in IT spending driven by a hike in PC sales from an anticipated upgrading cycle for the millions of older units that will eventually be retired, is also expected to help. "We expect further improvement across broad product sectors, positioning the industry for 19.8 percent growth in 2003, increasing revenues to $169.3 billion," said Scalise.

Only time will tell if these factors can lift the dark veil that is slowly being placed on the chip industry by the current state of the world.