Semi Sales Weakening, Fundamentals Gradually Improving

According to the Semiconductor Industry Association, worldwide sales of semiconductors grew to $121 billion in the first half of 2007, an increase of 2 percent from the $118.4 billion reported for the first half of 2006. Second-quarter sales of $59.9 billion declined by 2 percent from the $61.1 billion reported in the first quarter of 2007. Sales in June 2007 amounted to $20 billion, a decline of 1.7 percent from the $20.3 billion reported in May.

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Demand for chips has now exceeded orders for new capacity for four consecutive months. To me, that suggests that the overcapacity will be filled up within a few months. And tight capacity usually makes for a good time to own stocks.