Sales increased 34.2% from last August, in line with historical patterns.

"Semiconductor producers and their customers have reacted with unprecedented speed to recent reports of excess chip inventories," said SIA president George Scalise, in a press statement. "In previous market cycles, it has generally taken several quarters for the supply chain to take corrective action. When the first reports of excess inventory accumulation surfaced in the second quarter, both producers and customers moved quickly to adjust.

A pair of research groups, VLSI Research and iSuppli, are now reporting that chip inventories are declining, Scalise said.

Capital spending at IC makers is about 23% of sales, in line with historical patterns, SIA said. "At this time, we do not believe overcapacity will be a major concern in 2005," SIA said.

SIA reiterated its forecast of 28% growth for 2004. Its 2005 industry forecast will be released Nov. 3.

Sales of PCs and equipment for networking and telecommunications contributed to semiconductor growth in August. Sales of microprocessors increased 3.5% sequentially, reflecting PC sales patterns of the back-to-school season.

Chip sales were up modestly in all geographic regions. In Asia-Pacific, sales increased just 0.1% sequentially, reflecting the impact of inventory adjustment actions taken by OEMs, SIA said.