CHIP DEMAND SUPPORTS TECH STRENGTH
4 January 2010 by Cullen Roche
2 Comments
Technology has been a long-time outperformer in the equity markets. The latest data from the Semiconductor Industry Association confirms the outperformance. SIA reports:
Worldwide sales of semiconductors rose to $22.6 billion in November, a 3.7 percent increase from October when sales were $21.8 billion, the Semiconductor Industry Association (SIA) reported today. Sales were 8.5 percent higher than November 2008 when sales were $20.9 billion. Sales for the first 11 months of 2009 were $202.1 billion, a decline of 13.2 percent from the like period of 2008 when sales were $232.7 billion. All monthly sales numbers represent a three-month moving average of global semiconductor sales.
“For the first time in 2009, worldwide semiconductor sales in November were in positive territory compared to one year ago,” said SIA President George Scalise. “2009 ended with sales of many IT and consumer products faring better than earlier projections. Sales of personal computers continue to strengthen in line with recent projections and appear to signal the beginning of recovery of demand from the business sector. The release of the Windows 7 operating system in October has been a positive factor. Unit sales of handsets should come in roughly even with 2008 levels. In the consumer space, there have been a few bright spots including LCD TVs, which saw an increase of 25-30 percent in units in 2009.“With a sequential increase of 3.7 percent, November was the ninth-consecutive month of increased chip sales. Sales increased sequentially in all geographic regions,” Scalise concluded.
Source: SIA
Scalise is just a mouthpiece/cheerleader for SIA. Month-on-month Sales are always “up” in the last ~5 calendar months. Touting Nov/09 exceeded Oct/09 & Nov/08 is comparable to saying the sun came up this morning. It says even less when you remember these are 3-month averages.
Even so, SIA screwed up & provided the one relevant data point you need if you want to understand chip demand:
“Sales for the first 11 months of 2009 were $202.1 billion, a decline of 13.2 percent from the like period of 2008.”
This fall was despite 100s of billions in stimulus from governments across the globe.
Invest accordingly…
Year on year comparison with Oct 2008 onwards and until June 2009 would benefit from extremely low base after Lehman collapsed. One should note that the incessant lines of netbooks and smart phones (starting with iPhone last year etc) we have been witnessing since June 2009 is almost unprecedented since the tech boom of 1998-2000 period. The semicon industry is notorious for being too pessimistic in downturn and over-investing in up-turn. When Micron and Hynix start projecting strong profits ahead due to anticipated rising DRAM prices, it is usually time to sell semicon stocks again. And without new product offerings with mass appeal to replace the smartphones and netbooks in the next 12 months, 2010 to me would be a great disappointment for semicon and tech in general.