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Inside the Looking Glass? Looking through the volatile forecasts

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Depending on what flavor you prefer, there's certainly a forecast for everyone out there right now – many of them seemingly (and actually) conflicting.  So, what's to be made of these reports and why have we here at Smith's MarketWatch held steady with what and whom we believe?

 

At the most generalized level, 2010 is, without question, a significant growth year for the vast majority of the sectors in the semiconductor industry.  Tracking the semiconductor equipment industry through monthly book-to-bill numbers and three-month moving averages (3MMA), as published by SEMI.org, the continued and steady six-month climb in billings and bookings numbers (as 3MMAs), respectively, underscores the market improvements.  That the final book-to-bill ratios fluctuate is simply a residual of the math; the ratio differences between the numbers, not a critical variable of market stability.  The year-over-year comparisons show that the differences between 2009 and 2010 are highly significant with increases well into the 150+ percentile with growth on the 2010 side, obviously.

What these equipment numbers impart is the continued investment in the tools for the semi industry.  That, in turn, translates into what semi manufacturers are doing based on how they are spending their money (billings) and forecasting their growth (bookings).

Looking more closely into the semi markets, such as ICs, is where the volatility begins to erupt.  Wireline versus wireless vendors are experiencing very different markets, as well summarized here by EETimes. The wireline sector is retreating in forecasts for the third and fourth quarters of 2010 (3 and 4Q10), but still well above 2009 numbers.  Whereas the wireless vendors, thanks to a very robust smartphone and smart wireless device (SWD) markets, are showing continued growth and quarterly rises through 4Q10, and likely into 2011 (cf. our recent blog post here).

And then there are the important diversification strategies, underscoring the viability and opportunity for semi in the new sister industry of solar and green/efficient energy solutions (e.g., Freescale's latest move here, and this report about Infineon from WSJ.com).

Meanwhile memory is moving ahead and questions remain about the trajectory of DRAM, though not as much for NAND, as we discussed in our 'August Memory Outlook' here and related market overview here.

Discretes are presently in the news as well, with iSuppli having just forecasted ASP continued rises during the remainder of 2010, but with softening for 2011.  That, however, does not address the supply problems, wherein shortages are expected to continue through 1Q11.

So, there is good reason to feel like you're watching a ping-pong tournament if you've been reading and monitoring forecasts.  However, the baselines are not as volatile, the movement at the macro-scale is steady and shows continued growth but with continued questions about the availability of inventory (i.e., continued shortages).  As we get into the 4Q10 cycle, the variability in forecasts will settle, obviously, but for now, stick to the numbers and you'll know which side of the looking glass is which.


Lisa Ann Cairns, Ph.D.
Written on Thursday, 23 September 2010 10:32 by Lisa Ann Cairns, Ph.D.

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