Friday, October 21, 2011

2011 sales estimate could vary between $303.8 billion and $311.9 billion: Cowan 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.

It’s that time of the month again; namely, time for an advanced showing of next month’s global semiconductor sales forecast updates for both 2011 and 2012 as gleamed from September’s “actual” sales expectation range by exercising the “look ahead” forecasting capability of the Cowan LRA forecast model.

September’s upcoming global semiconductor sales result should, therefore, be instrumental in determining the sales growth expectation not only for the third quarter of 2011 but also for the full year of 2011. In particular, one can ascertain whether 2011 will exhibit positive yearly sales growth for the industry or will it turn negative as a number of market researchers have recently forecasted based upon downward third quarter sales guidance recently announced by many semiconductor suppliers?

Therefore, presented here is a “snap shot” of 2011′s global semiconductor sales and sales growth forecast prospects as a function of September’s “actual” sales forecast estimate range as derived via the Cowan LRA forecasting model. Moreover, the model has been extended in order to include a view of what 2012’s sales growth prospects might look like, thereby, providing a six quarter look ahead horizon that allows the model to also capture the four quarters of 2012.

It should be mentioned that September 2011′s “actual” global semiconductor sales number is scheduled to be released by the WSTS via its monthly HBR (Historical Billings Report) on or about Friday, November 4th.

In advance of the WSTS’s release of its September HBR, here is the monthly outlook analysis leveraging the Cowan LRA forecasting model, which projects worldwide semiconductor sales for 2011 (as well as 2012); namely, by providing a “look ahead” scenario for year 2011′s sales forecast range as a function of next month’s (in this case September’s) assumed range of “actual” global semiconductor sales estimates.

The output of this “look ahead” modelling analysis is detailed in the scenario analysis matrix displayed in the table.Source: Cowan LRA model.

In order to facilitate the determination of these “look ahead” forecast numbers, an extended range in assumed Sept. 2011′s “actual” sales is selected a-priori. In this month’s scenario analysis outlook, a Sept. 2011 sales range from a low of $27.028 billion to a high of $33.028 billion, in increments of $0.250 billion, is pre-selected as listed in the first column of the table.

Note that the range in September sales has been “purposely weighted” toward lower possible September sales estimates, that is, “skewed” toward a reduced monthly sales expectations range due to a perceived universal pessimism in industry sales for the second half of 2011 caused by lethargic consumers spending brought on by a generally sluggish global economy possibly extending into 2012.

This “best-guess” estimated range in assumed “actual” sales numbers is “downward offset” around the September actual sales forecast expectation of $31.528 billion as gleamed from last month’s Cowan LRA Model run (based upon August’s WSTS published “actual” sales number). The corresponding September 3MMA sales forecast estimate expectation is projected to be $26.413 billion. (Note: This assumes no, or very minor. revisions in either July or August’s previously published “actual” sales numbers as released in last month’s HBR by the WSTS).

The overall year 2011 sales forecast estimates corresponding to each of these pre-selected September sales numbers over the range of “actual” sales estimates is calculated by the model, and is exhibited in the second column of the table. The third column lists the associated year-on-year sales growth estimates for 2011 compared to year 2010′s global semiconductor sales of $298.315 billion as reported by WSTS.

The fourth and fifth columns show the corresponding September 3MMA, three Month Moving Average, sales forecast estimates and the associated 3MMA year-over-year sales growths relative to September 2010′s 3MMA sales of $26.209 billion, respectively. The sixth column lists the model’s Momentum Indicator, MI, which is defined as the percentage delta between the actual September sales result and the previous month’s (October) sales forecast estimate for September.

Finally, the seventh and eighth columns reveal 2012′s forecasted sales and sales growth estimates associated with last month’s September sales forecast estimate expectation, respectively.

Therefore, as the above scenario analysis table lays out, depending on the actual WSTS (to-be-released) September 2011 global semiconductor sales number, the forecasted full year 2011 sales estimate as determined by the model could vary between a minimum of $303.8 billion and a maximum of $311.9 billion. Thus, the corresponding 2010 to 2011 sales growth forecast estimate would then vary between a low of 1.8 percent and a high of 4.6 percent, respectively. Moreover, the table also reveals the model’s expectations for 2012′s sales and sales growth forecast estimates, namely, $333.6 billion and 7.6 percent, respectively.

Consequently, employing this above described “look ahead” analysis capability, the model can generate a “sensitivity output” of the “expected” year 2011 sales range (and a year-on-year sales growth range) as a function of the yet-to-be-announced (but, in this case, assumed) September 2011 ‘actual’ sales number.

Therefore, using this scenario matrix outlook table, one can “select” an expected September sales number (in the pre-selected range shown) and immediately see what the model would predict for year 2011′s sales forecast estimate along with its corresponding sales growth expectation well in advance of the real (to-be-published) ‘actual’ September 2011′s sales result.

Finally, stay tuned for the WSTS to post its September 2011 HBR (anticipated on or about November 4th, 2011) and thus, the ‘actual’ sales number. Once released, the reader can then easily ascertain the model’s latest forecast results as abstracted (or extrapolated) from the provided table (above) even before the Cowan LRA forecasting model is put through its paces and the latest, updated forecast numbers are published.

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