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Chip stocks are outperforming (SOXX +3.4%) after the SIA reports global chip sales rose 8.5% Y/Y in November, albeit while falling 1.3% M/M. Though year-ago figures were depressed by an inventory correction and some were expecting a M/M increase, the sector has already priced in quite a bit of bad news. Equipment maker Lam Research (LRCX +5.5%) is one of the standouts after D.A. Davidson starts coverage with a Buy and $56 PT.
IDC sees global chip sales rising 4.9% in 2013 to $319B, a forecast that's nearly even with Gartner's 4.5%. However, the computing segment is expected to grow a mere 1.7%, as the PC industry's woes continue pressuring sales. The consumer segment is expected to grow a healthier 9.8%, as the tablet boom offsets slumping demand for consoles, DVD players, and other hardware. The communications segment is seen growing 6.5%, buoyed by surging 4G chip sales. (previous)
O2Micro (OIIM) warns it expects Q4 revenue of $16M-$17M, below prior guidance of $17M-$20M and a consensus of $18.6M. The company, no stranger to warnings, blames "broad-based weakness in demand in our end markets, coupled with lower than normal inventories being held in the supply chain." At least a few other chipmakers have similar problems. Shares are likely to fall after rising 8% in regular trading. (PR)
Freescale (FSL) CEO Gregg Lowe says he doesn't see any evidence global chip sales will soon rebound, even though Q4 is set to be the 6th straight quarter of Y/Y shipment declines. Gartner is slightly more positive, forecasting industry sales will rise 4.5% in 2013 after falling 3% in 2012. Rising NAND flash memory and ASIC sales, fueled by respective 33% and 38.5% increases in smartphone and tablet shipments, are expected to drive the increase, even as PC sales remain weak.
Tessera (TSRA) -6.9% AH after warning it expects Q4 revenue of $50M-$53M, well below the $73.5M estimated by the one analyst who covers the company. Chip packaging IP revenue is expected to fall to $42M-$43M from Q3's $57.9M, and camera module sales to $8M-$10M from Q3's $14.8M. No explanation is given for the warning, which is harsh even in light of the ones recently issued by Altera and Lattice Semi.
Texas Instruments (TXN +3.8%) is up after providing a guidance update that's being received favorably in light of industry and company-specific issues. During its update call, TI noted the wireless processor/connectivity business it's exiting will post a Q4 loss on revenue of ~$200M, and that those sales should be gone by 2014. Computing, industrial, and telecom infrastructure chip demand is also weak, though console and e-reader demand is healthy - that last bit could be a positive for AMZN and BKS. Chip stocks are outperforming (SOXX +2%). (Audi deal)
Chip stocks are receiving some sell-side love this morning. 1) Benchmark has raised its rating for the sector to Overweight, citing reasonable inventories and low expectations. 2) Anadigics (ANAD) has received an upgrade to Buy from Needham; the firm says it's now less worried about the chipmaker's cash position, and is encouraged by survey results for its new single-chip Wi-Fi front-end ICs. 3) Pac Crest is launching coverage on Silicon Labs (SLAB) with an Outperform and $48 PT.
It pays for chip companies to have good mobile exposure these days. TSMC (TSM +1.4%), the top foundry for Qualcomm, OmniVision, Broadcom, and other mobile chip names, reported its October sales rose 15% M/M and 32% Y/Y to $1.7B, boosted by growing 28nm chip production. Rival UMC, by comparison, only saw 12% Y/Y growth. Credit Suisse now thinks TSMC should be able to hit the high end of its Q4 revenue guidance range thanks to smartphone-related orders.
Analog chipmakers Diodes (DIOD -7%) and Microsemi (MSCC -5%) are heading south following their Q3 reports (I, II). Though Diodes' Q4 revenue guidance ($160M-$167M vs. $164M consensus) was in-line, its gross margin forecast of 23%-27% is underwhelming, given the midpoint is below Q3's 26.2%. Microsemi is guiding for Q4 revenue of $262M-$268M and EPS of $0.57-$0.60, mostly below a consensus of $268.1M and $0.60. The chip industry remains mired in a slump. (Diodes PR) (Microsemi PR)
Global chip sales rose 2% M/M but fell 3.9% Y/Y in September, according to the SIA. For the whole of the Q3, sales rose 1.8% M/M and fell 4.7% Y/Y. Q3 results/guidance from Intel, Altera, Texas Instruments, and others made it clear the industry's demand issues are broad-based. Qualcomm's FQ4 report tomorrow should help shine a light on how mobile (a relative strong point) is faring. (tables - PDF)
While Facebook leads an Internet stock rally, chip stocks have sold off over the course of the day (SOXX -1.3%). Broadcom (BRCM -2.9%) and Altera's (ALTR -8%) guidance (I, II) is taking a toll, and the Street might also be concerned about the implications of EMC and Juniper's guidance. During its earnings call, Broadcom said it expected its networking/wireline infrastructure chip sales to be weak in Q4, due to both soft enterprise and service provider spending.
Chip stocks are outperforming a little following ARM's (ARMH +11.6%) pleasing Q3 report (I, II), in which the company reported a 16% Y/Y increase in Q2 unit shipments (from which Q3 royalties were derived). Beaten-down PC chip stocks are among the winners: AMD +3.8%. NVDA +2.9%. INTC +1.1%. Earlier today, AMD launched its Vishera desktop CPU line - AMD is counting on the 4 and 8-core CPUs, which are priced aggressively, to help reverse share losses to Intel's Ivy Bridge. Reviewers offer tempered praise.
Texas Instruments' Q3 call didn't contain much for chip stock investors to be excited about. The analog chip giant claims customer inventories remain lean and demand visibility short; that the industrial and telecom markets are soft; and that September was the weakest month in the quarter. Also, wireless sales are expected to underperform again on a Q/Q basis, a likely sign Amazon is paring back Kindle Fire-related orders after building inventories in Q3. TXN -0.3% AH. (Q3 results: I, II)
In spite of warning of a calendar Q3 revenue shortfall, Microchip (MCHP +1.6%) is trading higher today. Moreover, in spite of Microchip's status as an industry bellwether, chip stocks are among the day's big winners (SOXX +2.1%). Chip stocks have underperformed the Nasdaq over the last month, leading some bad news to be priced in. Also, Jefferies' comments about iPhone 5 builds seem to be giving a lift to Apple suppliers.
Microchip (MCHP) -3% AH after warning it expects to report FQ2 (Sep. quarter) revenue of $407M-$408M, below a consensus of $420.3M. The microcontroller vendor, often seen as a bellwether for broader chip industry demand, blames "macroeconomic and industry conditions" in general. "The overall global economic outlook continues to be poor and is adversely impacting our business as well as the rest of the semiconductor industry." (also: I, II)
Avnet (AVT -9.6%) tumbles to 52-week lows after warning it expects FQ1 (Sep. quarter) revenue of $5.85B and EPS of $0.52-$0.58, below a consensus of $6.06B and $0.83. The company blames the impact of delayed IT projects on its hardware distribution ops, and a "pronounced slowdown" in Americas sales for its chip distribution ops. Given Avenet's bellwether status for chip demand, which is already looking shaky, the warning is likely contributing to early weakness in chip stocks (SOXX -0.9%). Rival Arrow (ARW -6.2%) is also selling off.