John Neuffer, newly installed chief executive of the Semiconductor Industry Association, springs into action as he flies to Beijing to deal with the Chinese government, which is aspiring to take a bigger chunk of the booming semiconductor business.

The global semiconductor industry posted record sales of $335.8 billion in 2014, up 9.9 per cent from 2013, according to the World Semiconductor Trade Statistics, the SIA reported Monday. DRAM performed particularly well, increasing by 34.7 per cent over the prior year.

Geographically, sales rose in all four regional markets for the first time since 2010. Highest growth rates (12.7 per cent) came from the Americas, closely followed by the Asia Pacific (11.4 per cent). At a slender (0.1 per cent), even troubled Japan was up for the first time since 2010.

"The prospects are pretty good for the industry," said Neuffer, formerly the senior vice president for global policy at the Information Technology Industry Council. "The U.S. economy is going well, and the China economy is not on rocket fuel anymore, but it's still running on premium," he said, noting China's slowing GDP growth.

Not all observers are as sanguine about the outlook for chips. With quarterly results in for most major chip companies, "we maintain our neutral view on the semiconductor industry and continue to prefer companies with specific growth drivers or restructuring stories," said Ross Seymore, analyst for Deutsche Bank, in a report. Leading stock indices for chips are down 2 to 3 per cent, he noted.

Long term, China is one of the top concerns for big chipmakers. Its big appetite for semiconductors is legendary, given it is the world's factory for everything from iPhones to servers. But its government is also closely watched by groups like the SIA because it is expected to pump as much as $10 billion this year into bolstering its local chipmakers in an effort to be more self-sufficient.

"We have some concerns with them partly due to transparency—we want to make sure there's a level playing field," Neuffer said. The SIA is tracking "range of policies ... that could leave China less secure because they could dampen the flow of innovative products," he said.

So after a couple days in Seoul this week, Neuffer will head to Beijing, a capital he spent time in recently.

I was in Beijing when Obama was out there. We got a bilateral understanding with China [on expanding an international trade agreement on IT products] and took that back to Geneva to what we hoped was a final round of talks with the larger groups of about 57 WTO members. We got within an eyelash, [but] the Koreans needed a tiny bit more, and the Chinese weren't able to agree to it. We're hopeful [a new deal on the issue] will get done in the first part of this year.

The so-called ITA expansion deal of the World Trade Organisation could eliminate as much as $300 million in tariffs on an estimated trillion dollars in sales of a wide range of high-tech products, including chips.

By: DocMemory
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