Semiconductor Revenues Slightly Below Seasonal Trend

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By Carlos Guillen

While total semiconductor revenue during 2010 will demonstrate to have reached a record level, it may fall a bit shy of my more bullish expectations. In fact, total semiconductor revenue during November grew less than I had expected, below seasonal trend. Even considering a stronger than seasonal increase in December, which will likely be the case, I am seeing an overall drop of approximately 3.5 percent in the fourth quarter.

According to SIA data, the three month moving average global semiconductor revenue in November decreased approximately 0.87 percent to $26.0 billion, but still represented a year-over-year increase of 14.4 percent. Looking at the data more specifically, I can see that the actual revenue level increased month-to-month by approximately one percent; however, this slightly growth was below my estimated seasonal trend of 2.5 percent. Nonetheless, given the rumors of a surging inventory buildup and given the fact that PC consumption is slowing faster than previously expected, the growth is certainly not bad.

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It is apparent that the softness in PC sales that was experienced in the third quarter is continuing into the fourth quarter, but to a lesser extent, negatively affecting demand for semiconductor components. On the other hand, demand for semiconductors is being offset by growth in a wider range of products that go beyond computers, such as smart-phones, tables, and industrial applications. Moreover, inventories for the most part appear to be in check. Semiconductor companies have become very quick at correcting inventory issues, particularly since everyone continues to be very concerned about macroeconomic factors.

All in all, I still see phenomenal semiconductor revenue growth in 2010. However, given the below seasonal revenue growth in November, I am slightly decreasing my full year 2010 growth estimate to 32 percent from 33 percent. According to my estimates revenue growth in December should make a nice comeback above seasonality, but not enough to prevent revenue in the fourth quarter from declining below 2 percent. In fact, my full year estimate implies a sequential decline of approximately 3.5 percent in the December quarter of 2010.

Looking out further, I expect 2011 will be a year of surprises, positively driven by demand of tablets and smart phones, but once again negatively affected by PC demand. I still expect to see semiconductor revenue growth in 2011, and I am increasing by growth estimate for the full year to 4 percent from 3 percent given a slightly lower starting point.

Disclosure: No position