Strong demand from PCs and consumer electronics led to demand for worldwide chip sales increasing 6.8% to a record $227.5bn (£133.8bn) last year.
Figures from the Semiconductor Industry Association (SIA) showed that sales for the fourth quarter of 2005 also jumped 8.6% to $59.9bn from the same quarter a year ago.
SIA president George Scalise said it was uncertain as to whether rising worldwide energy prices could have a negative effect on future growth.
But Scalise pointed out that the rising energy costs and the natural disasters of the last year had not impacted demand.
The SIA predicts that worldwide chip sales will increase 7.9% in 2006 to $245.4bn, and will reach $309bn 2008.
The SIA said this further growth would be driven by strong demand for digital signal processors (DSPs) and flash memory products used in consumer electronic devices.