Chip Equipment Gets Some Breathing Room

Japan-based equity research analyst Yoshihiro Shimada with Macquarie Research Equities says the firm’s estimates for chip sales for 2007 have been revised upward, to .7% growth from a prior estimate of a 2.6% decline, and the firm says sales for all of next year will be slightly higher than originally expected, at 19.6% as opposed to 19%.

The 2007 figure is lower than an estimate back on June 13 from U.S.-based Semiconductor Industry Association of 1.8% growth, but at least the numbers are going up. Shimada also says capital spending by chip makers won’t fall as much as feared, meaning chip equipment sales will actually rise .2% this year, rather than a forecast decline.

That makes things healthy in the medium-term for chip equipment, but less certain next year: Shimada is lowering the forecast for 2008 chip equipment sales to 27% growth from 32.5%.

Shimada says the firm prefers companies making NAND flash memory, which I guess would include, for example, Micron Technology (MU), and also chip foundries, which would include, for example, Taiwan Semiconductor Manufacturing (TSM). The firm is less bullish on DRAM makers, such as, I suppose, Qimonda (QI). None of these firms is specifically mentioned, mind you, I’m just hypothesizing examples.

The company’s general investment observation is that chip production relative to chip inventories, what it calls its “SPI” index, is set to rise steadily until April of ‘08, and the Philadelphia Semiconductor Index [^SOXX] may follow upward. Shimada says in the last decade, the SOX and other chip indexes have followed the rise and fall of the SPI pretty closely.