Semi Industry Looking Up as Sales Continue to Outgrow Capacity

For the second consecutive month, worldwide sales of semiconductors rose sharply in September, the Semiconductor Industry Association reported. Global microchip sales in September were $22.6 billion, an increase of 5.9 percent from September 2006 when sales were $21.3 billion.

5.9% probably doesn’t sound like stellar growth, and it isn’t much special. However, compared to the growth in industry capacity it is strong. And since price is a function of both supply and demand, sales growth that exceeds capacity growth should ultimately have a positive impact on pricing.

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Disclosure: author has a long position in the Semiconductor Holdrs ETF (SMH) and put options against shares of Lam Research (LRCX).