Welcome news, considering that back in June, SIA was calling for chip sales to fall 21 percent.

“The new forecast is brighter than our earlier projections, reflecting an improving global economy,” SIA President George Scalise said in a statement. “Unit sales of key demand drivers–including PCs and cell phones, which together account for about 60% of semiconductor demand–have been stronger than previously predicted. We remain cautiously optimistic for the longer term. The current forecast is closely tied to projections of continuing improvement in the worldwide economy.”

Third-quarter chip sales totaled $61.9 billion, down 10.1 percent from the same quarter last year, but up nearly 20 percent from the second quarter of 2009. No doubt about it, the market for chips is improving (see chart below; click to enlarge).

“Global semiconductor sales in the third quarter were above expectations,” SIA President George Scalise said in a statement. “September sales were in line with historical patterns, reflecting increased demand from end-users as they began the build for the holiday season.”

“Amid signs that we are in the early stages of recovery in the global economy,” Scalise added, “semiconductor sales continue to reflect normal seasonal patterns. Sales are running well ahead of the worst-case scenarios projected early in the year, and we are optimistic that total sales for 2009 will be better than our mid-year forecast.”

Sales are running well ahead of the worst-case scenarios? Well, I suppose any reassurance is a good one when your industry is down 10 percent year-over-year.

“After losing share to Intel on a sequential basis during three out of four quarters in 2008, AMD managed to reverse the trend in the first quarter of 2009,” iSuppli analyst Matthew Wilkins said in a statement. “AMD increased its allocation of global microprocessor revenue due to strong performances in each area of its microprocessor portfolio, particularly in its notebook products. This was an impressive feat given the economic downturn and the weakness in the PC and server markets.”

Of course, AMD (AMD) did suffer an econalypse-inspired revenue decline in Q1, as did Intel (INTC). And the factors that caused it are expected to persist. iSuppli figures the 2009 microprocessor market will top out at $28.6 billion, down 15.8 percent from $34 billion in 2008.

Another ugly SIA metric in a parade of them, though optimists will say that slight uptick in March is a sign that the industry has finally found a bottom from which to scramble upward. “The modest sequential rebound in worldwide sales in March suggests that demand has stabilized somewhat, albeit at substantially lower levels than last year,” SIA President George Scalise said in the report. “While all major product sectors showed month-on-month growth, there continues to be limited visibility in end markets. There are some bright spots such as ‘smart phones’ and ‘netbook’ PCs, but there are no clear signs of early firming of demand in other major end markets such as automotive, corporate information technology, and consumer electronics.”

So, perhaps we’re not on our way to the depths plumbed back in 2001-2002. And perhaps we are. The SIA doesn’t quite seem to know.

Welcome once more to Weekend Update! I’ll be filling in today for your regular host, Beth Callaghan, who’s on vacation.

And what sane person wouldn’t be, after the slew of Silicon Valley silliness inspired by April Fools Day this past week? Digital pranks were the name of the game as Google (GOOG) and others heaped so many tepid hoaxes upon us that we wanted to call April Fold so as to quickly end this round of gags.

But no bag of tricks was needed for one Web site to April Fool itself into crying wolf about an imminent Google (GOOG) acquisition of Twitter, when a real story around the corner was aboutGoogle turning Turbo Tax tweets into ads.

Meanwhile, one of the biggest jokesters of them all, The Onion, won one of the biggest awards in journalism, a Peabody, meaning that the best sense of humor goes to that panel of judges. And to Stephen Colbert, who was willing to entertain (for a while) Twitter spokesmodel Biz Stone’s biz-model-less thoughts in an interview on “The Colbert Report.” Also on BoomTown this week: Facebook’s former CFO Gideon Yu is out, as was a leaked memo from Mark Zuckerberg about Yu’s departure and the company’s situation.

A sense of humor is certainly an invaluable feather to have in your cap these days. Digital Daily wrote about the most recent doom-and-gloom predictions and events to happen in this econalypse, like analysts’ predictions of YouTube losing $470 million in 2009, the barren IPO-less wasteland VCs are bemoaning and a major global slump in semiconductor sales. Other headlines weren’t quite so dreary: Google’s foray into VC land, the folks at BlackBerry HQ celebrating surprisingly good fourth-quarter results and the world’s worst-kept secret, the anticipated merger between IBM (IBM) and Sun (JAVA).

There was a similar mix of dark clouds and silver linings over at MediaMemo. The National Collegiate Athletics Association forced Twitter and partners AT&T (T) and Federated Media to take down one of its first ad campaigns, “March Tweetness,” crying copyright foul. Also running afoul with big companies in legal waters, free music Web site Seeqpod filed for bankruptcy. And video site Veoh laid off a significant amount of staff and kicked out its old CEO, replacing him with founder Dmitry Shapiro and refocusing the company on its “Video Compass” browser plug-in.

Online video is generally a turbulent space these, but the waiting is the hardest part for Hulu when it comes to the rumored Disney deal in which Disney (DIS) seems to be playing the field. Other gems of the week were URL-shrinking Web service bit.ly’s raising of $2 million and media mogul Rupert Murdoch’s Kindle envy.

In a new Mossblog, Walt Mossberg gives us his first impressions of the BlackBerry App World store in which Research in Motion (RIMM) takes a bold step into what was formerly the sole domain of Apple (AAPL). In Personal Technology, Walt reviews a network hard drive from Western Digital (WDC) that makes the technology gloriously simple for everyone. And in Mossberg Solution, Katherine Boehret takes a look at several laptop trays, designed to protect the–ahem–family jewels and family members in general from laptops’ scorching undersides.

Finally, our exciting Woz-watch, after many weeks, has come to a sad end: Steve Wozniak was voted off “Dancing with the Stars” this week after one misstep too many. Down, but not out, the Apple co-founder swore that the “geeks shall inherit the earth”… just not the dance floor, any time soon. Please.

More next week.

“While it’s horrible that people are out of jobs, I think it’s good for the nation long term; I think it’s good for this industry, the semiconductor industry; I think it’s good for the valley.”

– National Semi CEO Brian Halla, March 8, 2009

To see just how badly the continuing erosion of consumer confidence is affecting the chip industry, one need only look at the pitiable state of National Semiconductor (NSM). After announcing third-quarter revenues that were down
31 percent from the previous quarter and 36 percent from the same period a year earlier, the company said today it would sack more than a quarter of its workforce. In the months ahead, National Semi will close two facilities and eliminate 1,725 jobs.

A brutal cut–so brutal, in fact, that you’d think it might compromise the company’s ability to properly service its market. Yet with current quarter sales expected to fall five to ten percent sequentially, CEO Brian Halla says it’s a necessity. “The worldwide recession has impacted National’s business as demand has fallen considerably,” said Halla. “The actions we announced today will help us remain competitive.”

And don’t forget, they’re good for the nation and for the industry… long term. For those affected by them, not so much.

Fairchild (FCS) reduced its guidance as well. It had been expecting $338 million to $360 million in sales for its fiscal fourth quarter. Now it expects just $320 million.

Fairchild is the latest semiconductor company to temper its estimates as demand for the computers and telecommunications gear in which its chips are used contracts. Earlier this week, Texas Instruments (TXN), National Semi (NSM) and Broadcom (BRCM) all cut their projections because of lousy market conditions.

Sounds intriguing, yeah? So what it is it?

Chowdhry hasn’t the faintest idea. But he speculates that it will involve chips developed by P.A. Semi, the boutique semiconductor design company Apple acquired last April. A clearer picture of what’s in store for us will emerge in early 2009 with a series of new Apple patent filings says Chowdhry, who contends that a P.A. Semi chip has also been designed into the third-generation iPhone–which will boast vastly improved performance and battery life over its predecessor.

A bold move for AMD (AMD), which has sustained seven straight quarters of losses, and one that could dramatically alter its fortunes. Indeed, right off the bat, AMD will push $1.2 billion in debt off its books and onto those of the The Foundry Co. “This is the biggest announcement in our history” said CEO chief executive, Dirk Meyer. “This will make us a financially stronger company, both in the near term and in the long term, as a result of being out from the capital expense burden we have had to bear.”

And, of course, it will sooner or later. Certainly, the Semiconductor Industry Association, which provided the sales numbers above, thinks so. Earlier this week, it called on the U.S. House of Representatives to pass the $700 billion financial rescue package before it. “Consumer demand accounts for more than two-thirds of the U.S. economy,” said SIA president George Scalise. “A slowdown in sales of a broad range of consumer products such as personal computers, cellphones, and entertainment electronics would have an adverse impact on semiconductor sales in the fourth quarter, which is normally the strongest quarter for the chip industry. The entire supply chain, including our suppliers and customers, will be harmed if access to credit becomes difficult.”