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Tickers in this Article: INTC, ALTR, TXN, ASML, QCOM, NOK
It looks like global consumers are still willing to pay up to get the latest and greatest in techno-gadgetry despite the tough economy. At least that's the conclusion one can draw from the latest sales numbers just released by the Semiconductor Industry Association (SIA).

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Latest data for August shows a sequential increase of 5% making it six consecutive months of such growth. Analysts now see the momentum continuing, possibly through the balance of this year, echoing some of the positive sentiment coming from the industry of late.

Major players like Intel (Nasdaq:INTC), Altera (Nasdaq:ALTR),Texas Instruments (NYSE:TXN) and ASML(AMEX:ASML) all upped their third-quarter outlooks recently, raising hopes that the 25% plunge in chip sales during the first half of this year may now have finally bottomed.

With the shares of most of the semis having corrected a bit over the last couple of weeks, should investors now view this bit of positive news as the cue to once again start loading up on this sector? The answer is probably "yes" but investors must employing a greater degree of selectivity as industry developments from this point onward are likely to create as many losers as winners.

No More Growth For Chip Makers
After years of relying on the growth in the personal computer market, PC unit sales have essentially plateaued, and revenues are likely to continue declining as average selling prices remain locked in a deflationary spiral. Analysts are now projecting PC market revenues in 2011 that may only match the numbers achieved in 2007. That's the definition of a highly mature market with limited growth prospects.

Enter The "Internet Toaster"
It's no wonder then that most of the chip makers are busy looking for other growth opportunities in new areas like embedded microchips that are expected to find homes in all sorts of products including cars, appliances and communication systems. According to Intel CEO Paul Otellini, these embedded chips represent a $15 billion market opportunity. That's a lot of internet toasters.

Rival Texas Instruments has also seen the potential of this market, predicting annual rates of sales growth for these chips could be as high as 20%, once the semiconductor industry rebounds. (To estimate growth rates, you need to be able to predict a company's top line growth, learn more about this in Great Expectations: Forecasting Sales Growth,)

Mobile Chips Also Key To Future Growth
In the shorter-run Intel has got its sights set on taking a sizable chunk of the market for smartphone chips away from leading mobile chipmakers like Qualcomm (Nasdaq:QCOM) and Texas Instruments. Last June, Intel cut a partnership deal with leading handset maker Nokia (NYSE:NOK) based on the launch of two new mobile chips set to make their debut in 2010 and 2011.

The move comes at a time when many of Intel's Asian rivals in the chip markets have had to scale back capital spending and hedge future innovation potential. That leaves better financed operators like Intel in a position to gain control of future pricing, possibly ending the more than decade-long deflationary spiral in chip prices.

The Bottom Line
If the "smart appliance" trend is for real, then it could be the driver of the next big surge of growth for the semiconductor stocks.

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