Smith Market Blog

Positive Indicators, Tepid Economies: Which roller coaster ride are we on?


SEMI's January Book-to-Bill ratio of 1.20 came out last week showing impressive growth numbers.  Since we track these ratios monthly, and report on them when they show particularly important and interesting trends, the January numbers coupled with the news reported here in last month'sMarketWatch Commentary further confirms the upward trending.

That's all fantastic news.  We also know that there are numerous reports and forecasts of shortages set to continue for a handful of sectors in semi, due in part to the lean inventory management that saved many during the recession, and due to the reduced utilization levels and CAPEX at the fabs for a few years that have also reduced capacity in the market.  These variables have helped strengthen ASPs and resumption in some consumer demand has also helped orders as reflected in the strong three month moving average (3MM) book-to-bill ratios with billings at US $946.3 million and bookings at US $1,132.4 million (=1.20 ratio).

January's positive indicator has not been matched by uniformly positive macro economic forecasts for the later half of 2010.  While we see very strong numbers for this year (Y10), the financial analysts are either getting bored with the better times or there are dips ahead in our ongoing roller coaster ride.

At MarketWatch we've been noting the connection between semi's health and consumer demand for years.  That means, of course, that we need to think smartly about this 'rebound' year and not expect an easy upward trajectory revenue ride.

The Information Network was reported by DigiTimes on 2/23/2010 as forecasting a "mid-year Y10 slowdown in semiconductor revenues [...].  Personal consumption will remain sluggish in the second half of the year because of a jobless recovery, further deterioration in credit, and continued weakness in home prices."  These concerns are echoed here but with predictions moved to 4Q10.  Wall Street analysts tend to see greater storm clouds, such as this one, but as financial analysts say, "that and $2 will buy you a cup of coffee."

Here at MarketWatch, we'll be monitoring ALL of the information to provide you with reliable insight, as more data unfold and can be brought into a fuller analysis.  Watch especially for our next Quarterly edition in April where we'll feature the economic state for semi in the Americas.

Lisa Ann Cairns, Ph.D.
Written on Friday, 26 February 2010 15:40 by Lisa Ann Cairns, Ph.D.

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