(IDG) -- The chip industry is entering its first period of sustained recovery since 1995, the Semiconductor Industry Association (SIA) said in its annual forecast, which was released yesterday. The industry has been helped by surging demand for Internet appliances like smart phones and handheld computers, and by strong sales of Internet infrastructure products, according to the SIA.

"This is the great year of recovery for the semiconductor industry," said Brian Halla, chairman, president and CEO of National Semiconductor Corp., in a statement. The world has entered an "information age" in which users want access to information anytime, anywhere, Halla said, adding that the thirst for knowledge has been accompanied by a shift in product leadership from PCs to wireless devices and Internet infrastructure equipment.

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The forecast clearly is good news for the chip industry, which has watched its historically high growth rates tempered by several factors including falling dynamic RAM prices, the financial crisis in Asia and demand for rock-bottom-priced PCs.

Worldwide chip sales will reach $144 billion this year, up 15% from last year, according to the forecast. That growth rate will increase to 21% in 2000, when sales will reach $174 billion, and remain high at 20% in 2001, when sales will be $209 billion, the SIA said.

In line with the cyclical nature of the semiconductor industry, particularly in the DRAM market, growth will slow to 12% in 2002, when chip makers will enjoy record sales of $234 billion, the industry group said.

The SIA's forecast is fairly consistent with estimates by market research firm Dataquest in San Jose, which said recently that it expects chip sales to grow 14% this year to $155 billion and sustain double-digit growth through 2002.

Other highlights in the SIA's 1999-2002 forecast include the following:

Growth in the microprocessor market will be slower than in the past because of a "maturing PC market." Sales should grow 11% to $28 billion in 1999, increasing 17% to $32 billion in 2000 and 14% to $40 billion in 2001. In 2002, microprocessor sales are expected to grow 13%, to $42 billion.

DRAM makers are enjoying their first good year since 1995. Sales are expected to increase 31% in 1999 to $18 billion, then by 39% to $25 billion in 2000. They will grow by 44% in 2001, to $37 billion, and increase by only 5% in 2002, to $38 billion.

Flash memory is the fastest growing memory product in 1999, driven mostly by its use in cellular phones and digital cameras. Flash-memory sales should grow 63% in 1999, to $4.1 billion, then by 36% in 2000, to $5.5 billion. Sales will grow 19% in 2001, to $6.6 billion, and then slow to 1% growth, or $6.7 billion, in 2002.

The SIA's members include most of the U.S.'s largest chip manufacturers, including National Semiconductor, Intel Corp., Advanced Micro Devices Inc., Texas Instruments Inc. and Motorola Inc.

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