Steve Szirom's  Instablog

One of the boating world's telltale indicators of the industry's health have traditionally been the attendance trends at boat shows.  The stats have varied somewhat, with  attendance being reported from from flat to 15% or more down from previous shows.  With 300 to 400 credible boat shows of all types and sizes in the U.S.A., the boat show market has become oversaturated.  In May 2009, the National Marine Manufacturer's Association (NMMA) announced cancellations of three boat shows from its 23 boat show roster.  Those getting cut were San Diego Boat Show, the Schaumberg (Ill.) Boat & Sports Show, and the Virginia In-Water Boat Expo & Sailfest.  Further pruning is likely to come while some boat shows will broaden their focus to keep attendance figures from slipping.

The economic slump in the boating industry was evident at the recently-held International Boatbuilder Exhibition & Conference (IBEX) in Miami. Reports indicate a lukewarm attendance this year. Normally in good years, the exhibitor booths are crammed into every space in the halls. This year IBEX only set up two exhibit halls for its 500 exhibitors and still had to fill out isles with eating areas. IBEX itself is saying goodbye to overpriced Miami and is moving the event to Louisville, Kentucky in 2010 bringing cost-savings to the show organizer as well as attendees and exhibitors.

Nevertheless, the sailboat shows are showing resilience.  At the recent U.S. Sailboat Show held in Annapolis, Md., one of the biggest in the U.S., the crowds came and most exhibitors indicated satisfaction with the show.  According to anecdotal reports, some exhibitors saw signs of a rebound.  At the recent Boats Afloat Show sponsored by the Northwest Yacht Brokers Association,  the attendance was lighter than usual but still well attended.  A quick survey of brokers onsite by Oyster Yachting indicated many lookers but deals were sparse compared to earlier shows.  Boats Afloat is one of the two main boating events in the Pacific Northwest held in the Seattle, Wash. region.

Based on metrics from Info-Link, the boating industry’s unit sales overall have started peaking in early 2004 and have dropped about 45% since then – about 1% drop per month on the average. Generally, the boating industry has been slow to throttle back production and has not anticipated the steep drop-off in sales which commenced in early 2008. Dealers have been working on clearing off excess inventories with discounts and incentives as large boat builders pared back production.


Source: Info-Link Bellwether Report

In June-July 2008 oil prices skyrocketed to almost $150/barrel. Some manufacturers started shifting mix or adding new models of sailboats to their line as gas guzzling power vessel sales stagnated. Within weeks of the July highs, prices collapsed as the mortgage crisis in the United States morphed into a full-fledged economic and financial meltdown around the world.

Because of the overall economic downturn and resultant tight credit policies, boat sales have been held back by a combination of factors:

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The chart shows the performance of semiconductor sector IPOs since the start of trading.   Since InsideChips began tracking semiconductor IPO performance on January 1, 2005, only two companies, Hittite Microwave and Cavium Networks fared well for investors who purchased the stock at the opening price.

PixelPlus, a Korean supplier of CMOS image sensor and imaging ASICs, went public in December 2005 but was de-listed due to its financial condition.  Qimonda, a memory spin-off from Infineon, went public in August 2006 but entered insolvency proceedings earlier this year.  Saifun Semiconductors, an Israeli non-volatile memory IP provider, was acquired by Spansion, a Japanese pure-play provider of Flash memory solutions.  Spansion itself, which went public in December 2005, is mired in financial difficulties and is last on the performance listiing.

For  now the IPO window is closed for semiconductor companies.  The last semiconductor-related IPO was by MEMSIC (Dec. 2007).    For now, the exit strategies of 800+ venture capital backed semiconductor firms which are tracked by InsideChips must rely on the merger or acquisition route.   Even there, valuations for a typical deal are in the $50 to $100 million range compared to $400 million during the industry's better days.

As the Q1 and Q2 2009 financial report cards rolled in, it was clear that there were signs of optimism for the chip industry as companies were starting to guide up their projected performance.   I would characterize the current scenario as one of industry stabilization -- the industry has stopped contracting.  Has a long term stock price uptrend started?  My gut feels says no...not yet, anyway.  In the short-term, however, I am going with the trend until it breaks down ... very cautious at this point.

While the supply chain has tightened, excess inventory has been worked off, and capacity utilization has increased, there is still an issue in my mind of the macro-economic situation which now affects the chip industry in a fundamental way since a large part of the industry's revenues are derived from consumer purchases of electronics-related products.


The SOX Philadelphia Semiconductor Index (SOX) chart shows a vibrant and steady recovery since reaching lows of 175 in November 2008.  Since then SOX has followed a 75-point channel.  If the index moves below the channel in the future, it would signify a period of weakness in semiconductor issues for the short-term at the minimum, in my view.

The semiconductor group along the broader based technology stocks has led the rally which began in March 2009.  In the last 12 months, SOX gained 50% while the broad DJIA gained 11% in relative terms.

Another metric which I use as an input to time my exit is InsideChips' Semiconductor Advance-Decline Indicator.  This indicator is based on the daily advances and declines of 111 chip stocks (excluding equipment makers).  Since early 2007, this indicator showed a steady downward trend.  Since the beginning of this year, the tone of this indicator changed with a bottom forming and now showing a moderate uptrend.  If the slope of this A/D line is up and the market is trending upward as it is now, then the market is healthy. 



I will update this article, when I see a change of direction in the indicator.