'Look ahead' scenario for global semicon sales forecast: Cowan LRA model update

This is a continuation of my coverage of the fortunes of the global semiconductor industry. I would like to acknowledge and thank Mike Cowan, an independent semiconductor analyst and developer of the Cowan LRA model, who has provided me the latest numbers.

In advance of this release, Mike Cowan wishes to again share an additional feature of the Cowan LRA Model for forecasting worldwide semiconductor sales; namely, the ability to provide a 'look ahead' scenario analysis for 2010's global semiconductor sales forecast update as a function of next month's (in this case July's) actual global semiconductor sales estimate.

The specifics of the scenario analysis are presented in the following paragraphs and detailed in the scenario matrix table.

Table 1: Semicon forecast -- Cowan LRA modelSource: Cowan LRA semiconductor sales forecasting model.

In order to illustrate this capability, Cowan has selected a range in possible July 2010 sales. In this particular scenario, a sales range from $20.89 billion to $25.89 billion in increments of $0.5 billion was chosen as listed in the first column of the Table 1.

This estimated range of actual sales is 'centered around' the actual July sales forecast estimate of $23.388 billion as determined by last month's June run of the model. The corresponding July 3MMA (three-month moving average) sales forecast estimate is $24.849 billion.

The overall year 2010 sales forecast estimate for each assumed estimated sales number over the selected range of July actual sales is calculated by the model, and is shown in the second column of the table.

The third column reveals the resulting year-on-year sales growth estimates compared to year 2009's actual sales of $226.3 billion.

The fourth and fifth columns show the corresponding 3MMA, sales estimate and the associated year-on-year sales growth relative to July 2009's 3MMA sales (of $18.423 billion), respectively.

Finally, the sixth column lists the associated Momentum Indicator, MI, which is defined and discussed.

June 2010’s actual semiconductor sales (of $27.153 billion) came in lower (by $1.138 billion) than the model’s last month's June 2010 sales forecast estimate (of $28.291 billion) representing a minus 4 percent delta comparing June 2010's actual sales number (published by the WSTS) to the projected forecast estimate “put forth” by the Cowan LRA forecasting model and reported last month.

This percent delta represents the Cowan LRA Model's MI. See tables 2 and 3 for this indicator’s short-term (last 15 months) and long-term (past 8+ years) historical trend, respectively.

The short-term (15 months) historical trend is given below.
Table 2: Monthly momentum indicator trend over past 15 months (Apr. 2009 through June 2010)Source: Cowan LRA model.

The long term (past 8+ years) historical trend is given below.
Table 3: Long term evolution of monthly momentum indicator -- from Feb. 2002 to June 2010Source: Cowan LRA model.

The MI is defined as the percent difference between the actual sales for a given month -- in this case May 2010’s just published actual global sales of $24.007 billion and the forecasted sales estimate for May 2010, that is, $22.743 billion, which was calculated and published last month.

The MI can be either positive or negative and is a measure of the percent deviation of the actual monthly sales number from the previous month’s prediction derived by the model’s linear regression analysis of the past 26 years of historical, monthly global “sales experience.”

July 2010’s sales forecast estimate is projected to be $23.388 billion.

Therefore, as the table reveals, depending on the actual WSTS to-be-released July 2010 global semi sales number, the forecasted 2010 sales estimate, as determined by the model, could vary between $299.06 billion and $308.12 billion, while the corresponding 2009 => 2010 sales growth estimate could vary between 32.1 percent and 36.1 percent, respectively.

Note: The previously published Cowan LRA Model's 2010 sales forecast update, which was based upon June 2010's actual sales (of $27.153 billion), came in at $303.91 billion corresponding to a sales growth forecast estimate of 34.3 percent as presented early this month.

Using this analysis capability, the model provides a "sensitivity output" of the "expected" 2010 sales forecast (and yr-o-yr forecasted sales growth) as a function of the yet-to-be-published actual July sales number.

Therefore, employing Table 1, one can a-priori "select" a July sales number (in the range shown) and immediately see what the model would predict for a 2010 sales forecast estimate along with its corresponding sales growth expectation in advance of the actual to-be-published final July sales result.

Stay tuned for the WSTS to publish (expected on August 31, 2010) for the actual July 2010 sales number. One can then ascertain the model's latest forecast outlook as abstracted (or extrapolated) from the attached table even before Cowan runs his model and subsequently publishes the updated forecast numbers based upon July's actual sales result.

Table 4: Evolution of various semiconductor market analysts' sales growth forecasts for 2010 (As of 20 August 2010)Source: Cowan LRA model.