News coming out the chip sector has been great so far this week, but analysts warn that economic woes such as the housing mess might still spoil the party.

The consensus among analysts appears to be that corporate and personal spending on technology products will be hurt by the housing issues in the United States, but nobody knows how bad the impact will be, according to Peter Sutton, head of research at CLSA Asia-Pacific Markets in Taipei. Demand for technology products, especially computers and mobile phones, in the rest of the world is going strong, he said, but even that demand could pull back in the event of a U.S. slowdown because many developing countries depend on exports to the United States for income.

By the end of this year, people should know how bad the loan and home foreclosure situation will be, according to Sutton. The housing market in the United States, he said, is expected to bottom in the first quarter of next year. The fear is that the housing issues could hurt consumer spending at some point later this year, but so far the technology industry isn't showing any signs of trouble.

The flow of good news started in Asia on Monday with the world's largest contract chip maker, Taiwan Semiconductor Manufacturing, reporting record high sales in August and revising up its third quarter financial guidance.

The company, considered a bellwether for the overall tech industry because of the variety of gadgets it makes chips for, said consolidated sales in August rose 10% year-over-year to NT$30.02 billion (US$907.0 million), beating its previous record of NT$27.96 billion from July of last year.

TSMC also predicted its third quarter revenue will likely hit between NT$87 billion to NT$89 billion, higher than a previous forecast of NT$85 billion to NT$87 billion, and said its gross margin would come out at the top end of expectations. Some customers asked TSMC to ship some chips earlier than expected, a spokesman for the company said, but the company won't comment on how that might impact the fourth quarter.

Taiwanese chip designer MediaTek Inc. followed up TSMC's news, announcing an agreement to buy certain telecommunications chips products from Analog Devices, of Norwood, Mass., for US$350 million in cash. The deal itself isn't huge, but merger and acquisition activity normally takes place when companies see bright prospects for the future, and MediaTek is looking to use the acquisition as part of its mobile-phone chip strategy.

The IDG News Service is a Network World affiliate.