By Carlos Guillen
Now that the third quarter has culminated, I continue to see semiconductor revenue growth, but the big question is whether this growth will continue till the end of the year. As it stands, news coming from main industry players is not very encouraging. Intel (INTC) and Advanced Micro Devices (AMD), for instance, have both reduced their prior revenue guidance for the September quarter, and most recently industry research firm iSuppli lowered its forecast for 2010 semiconductor industry growth from 35 percent to 32 percent. Perhaps somewhat encouraging, growth forecasts from the Semiconductor Industry Association (SIA) were left unchanged, although there still remain concerns about the state of the economy in the US and in Europe.
Most recently, Semiconductor Industry Associations data indicated that the revenue momentum was continuing. In fact, according to SIA data, global semiconductor revenue in August reached a new record high of $25.7 billion, increasing year-over-year by 32.6 percent and increasing sequentially by 1.78 percent. Moreover, not one region had contracting revenues.
While the August sequential growth rate is respectable, I must point out that the rate did run below its normal seasonal trend for the second consecutive quarter. Nonetheless, if revenue remains flat at its current level, it will have grown sequentially by 3 percent in the third quarter. Somewhat encouraging was that the Association did not cut its prior revenue forecast for 2010, leaving it at 28.4 percent; however, I believe this may be somewhat conservative as I calculate that it is implying a fourth quarter revenue contraction of about 10 percent.
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Taking a look at the sum of Intel's and AMD's most recent guidance revisions for third quarter revenues, I can still see growth in the third quarter. Although Intel said that revenues were running softer than expected, they will still see sequential revenue growth in the September quarter. The company lowered its prior revenue guidance to $11.0 billion, plus or minus $200 million, from the previous expectation of $11.6 billion, plus or minus $400 million. However, the midpoint of the new guidance range still represents sequential revenue growth of 2.18 percent.
AMD on the other hand will not see growth during the third quarter, as it lowered its guidance to a revenue contraction between 1 and 4 percent from a its prior growth forecast of 7 to 8 percent. The new guidance translates to a revenue range of $1.58 billion to $1.63 billion. However, the sum of the midpoints of Intelfs and AMDfs revenue guidance ranges implies CPU chip growth of about 1.56 percent in the third quarter. If I consider this as a proxy for the broader chip market, then semiconductor revenue in the third quarter will also experience sequential growth.
All in all, I believe that the softness in PC demand will not be enough to derail overall semiconductor industry growth for the full year as demand for semiconductors continues to grow into a wider range of products that go beyond computers. So, although I am cautious, I still believe the semiconductor revenue momentum will continue, and I continue to expect semiconductor revenue to increase sequentially by 4 percent during the September quarter of 2010, which is below seasonality (Sept. quarters normally increase by 8%), and to rise by 33 percent in 2010.
Disclosure: No positions