By Carlos Guillen
Despite the fact that the bar has been raised for the semiconductor industry in terms of growth rates, as 2010 was a stellar year for this industry, we continue to see strengthening growth as 2011 unfolds. In general, the signs from the semiconductor industry as a whole are indicating that growth will be stronger than previously anticipated,
SEMI's most recent data showed that billings ticked higher in January, even after making a significant jump in December of last year. The trailing three-month average billings in January totaled $1.80 billion. This monthly result increased approximately 2.5 percent from the level achieved in the prior month and increased a whopping 88 percent from the year-ago level. This result was very encouraging, as I was expecting a slight cyclical dip given that during the month of January growth rates are usually down by 1.5% on a month-to-month basis.
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Most recently, Applied Material (AMAT), the largest player in Semiconductor Capital Equipment industry, reported surprisingly high January quarter revenue of $2.69 billion, which was nicely higher than the Street's consensus estimate of $2.59 billion.
More encouraging, however, was that management demonstrated increasing confidence, providing strong revenue growth not only in the April quarter but also in all of fiscal 2011. As a result of this new level of confidence, management forecasted that revenue would grow by over 15 percent in its fiscal year 2011; this was a significantly more compelling forecast than that provided back in November of last year, when Applied Material forecasted that yearly revenue would be up or down by 10 percent.
Management also raised its growth rate expectations for the market's wafer fab equipment spending in 2011; AMAT now forecasts wafer fab equipment spending to be up 10 to 15 percent from the approximately $31 billion level achieved in calendar 2010. This new expectation represents a strong improvement from the company's prior forecast calling for growth of up or down 10 percent provided three months ago.
Overall, I am very encouraged with the performance of many semiconductor players during this earnings season, and I am becoming more and more optimistic that the semiconductor capital equipment industry will demonstrate stronger than expected revenue growth in 2011. Moreover, while the state of the macro-economy is still rather weak, it is certainly improving, with increasing consumer confidence and a slowly improving job market, all serving to create better than expected conditions for ramping expenditures in capital. As it stands, I am forecasting semiconductor capital equipment billings growth of about six percent in 2011, up from my prior expectation of five percent.
