SEMI Industry Forecasts Taste Best With a Grain of Salt

Includes: PSI, SMH, SOXX, XSD
by: William Trent, CFA
Chip equipment orders seen rising 1 pct this year:

Sales of equipment used to make microchips are seen rising 1 percent this year to $40.9 billion, cooling markedly from last year’s 23 percent growth, a U.S. industry group said on Monday. The market is expected to grow 7 percent in 2008 and 4 percent in 2009, Stanley Meyers, president of Semiconductor Equipment and Materials International [SEMI] told reporters.

A quick refresher on what these forecasts are worth. Early this year, SEMI forecast that sales “will grow in the single digits in 2007, and in the double digits in 2008. In 2009, growth is anticipated to be in the single digits with sales expected to hit $50.42 billion.”

I guess technically 1% is “single digits,” or digit anyway. But as I said at the time, and again last month, if the industry group is to be believed the current decline will mark the shortest semi equipment contraction in history. Which is a big part of the reason why I don’t believe it.

The fact is, industry trade groups exist to promote industry trade. Whether the National Association of Realtors or anyone else, the industry forecasts are generally overly optimistic. I look to such groups for their current and past data, not their forecasts.