Friday, August 6, 2010

Semicon industry sales have peaked, growth to stabilize for rest of 2010 at 32-34 percent: Cowan's LRA model

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.

Here is the latest update to the Cowan LRA model-derived forecast results reflecting the just released “actual” June sales.

The actual June 2010 global semiconductor sales announced by the WSTS came in at $27.153 billion which is:
* 38.6 percent higher than 2009's June sales of $19.586 billion;
* Up 13.1 percent from last month's (non-revised) sales of $24.007 billion;
* And lower (by $1.138 billion, or down 4.0 percent) compared to last month's (May's projection) sales forecast estimate for June, that is, $28.291 billion.

It should be highlighted that June's sales report exhibited relatively large upward revisions for each of the months of Jan., Feb., Mar. and Apr., -- resulting in a cumulative upward revision of $0.888 billion to the June year-to-date global semiconductor sales number (that is, $144.647 billion) as detailed in Table 1 below.

Table 1Source: WSTS (Aug 2010).

As shown in Table 1 above, the WSTS reported upward revisions in the respective sales numbers for each of the first four months of 2010 of roughly the same magnitude (average per each month of $0.222 billion) with an overall total approximating $0.9 billion. Also notice (see details in Table 2 below) that the June-reported 1Q10 sales number was likewise revised upward by $0.645 billion corresponding to an upward revision of 0.93 percent.

Table 2Source: Reported by WSTS.

Therefore, taking into account these upward revisions, the latest monthly update to 2010's global semiconductor sales forecast estimate as determined by the Cowan LRA forecasting model becomes $303.914 billion corresponding to a projected 2010 year-over-year sales growth forecast estimate of 34.3 percent.

These latest forecasted 2010 sales and sales growth estimates decreased very slightly from last month's reported sales and sales growth forecast estimates of $304.696 and 34.6 percent, respectively. Thus, the full complement of the latest, updated sales and sales growth forecast estimates for 3Q, 4Q and 2010 are detailed in Table 3 below, along with 1Q's updated and 2Q's actual reported sales numbers.

Table 3Sources: WSTS (June HBR report) and Cowan LRA Forecasting Model (August 2010).

Because of the relatively large monthly revisions published in June's WSTS sales report (discussed above), Table 4 provides the previous month's forecast estimates in order to facilitate a comparison between the latest (shown above) and the previous month's results (see below):

Table 4Sources: WSTS (May HBR report) and Cowan LRA Forecasting Model (July 2010).

Since the latest sales forecast estimates for 3Q, 4Q and 2010 are approximately the same in comparing the two back-to-back monthly forecast results (per the two tables above), one can infer that semiconductor industry sales have peaked and sales growth will stabilize for the rest of this year at approximately 32-34 percent. This is also reconfirmed by the Cowan LRA Model's Momentum Indicator for June going slightly negative (at -4 percent).

Additionally, next month's (July 2010) global semiconductor sales forecast estimate is projected to be $23.388 billion, which would "translate" to a July 3MMA sales forecast estimate of $24.849 billion assuming no (or very minor) revisions in May and June sales numbers as part of the WSTS's July sales report.

The 3MMA sales is normally published by the SIA (using WSTS sales numbers) as part of its monthly press release to characterize the S/C industry's monthly sales and sales growth posture. The SIA's July 3MMA is scheduled to be announced on Tuesday, August. 31, 2010.

Cowan has also presented a chart, representing the evolution of various semiconductor market analysts' sales growth forecasts for 2010 (as of August 3, 2010).

Semiconductor market analysts' sales growth forecasts for 2010 (as of August 3, 2010).Source: Cowan's LRA model.

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