Global semiconductor shipments were up 11.9 per cent in June, compared to one year earlier, according to analysts in Japan. However, the uncertain and increasingly competitive PC market is squeezing prices for chips and LCD displays from major manufacturers in Japan, Korea and internationally, and this trend is expected to strengthen in the second half, regional observers say.

Generally, sales of chips and components to mobile phones makers have been considerably healthier than sales to PC makers over the past three months, technology industry analysts in Asia note.

Nomura Securities analysts in Tokyo are expecting a general slowdown in the semiconductor market in the second half of the year, due to inventory build up at contract chip makers and stronger price competition in the PC chip market. Chip makers with the resources to put pressure on their competitors during this period have a chance to gain market share, Nomura predicts.

Researchers at Korea Investment & Securities in Seoul acknowledge that short-term chip price corrections are a near certainty. However, they say they are still hoping for overall growth across the semiconductor market and a rebounding flat panel display sector, a positive indicator for local firms like Samsung which are heavily involved in both areas.

“Although semiconductor prices should undergo corrections ahead of the peak demand season in September-October, we believe the price correction will be minimal amid rising expectations for the second half of 2006,” the company predicted in a research briefing for clients.

Analysts in Korea are expecting near-term stronger pricing from the LCD sector, but say prices will be pulled down again unless there is a rebound in the PC market.

“The TFT-LCD industry is entering a peak season after having adjusted utilisation rates in May-June. The strong rebound of monitor prices should continue until August-September, thanks to the peak demand season,” Korea Investment and Securities noted. “Without the expansion of the PC demand base, however, we do not believe the price recovery will be sustainable going forward.”

The gloomy predictions appear to partly contradict recent more cheerful forecasts from an industry association, and reinforce warnings of excess chip inventory at Intel from US research firm iSuppli.