3/5/2010
By Carlos Guillen, Semiconductor Analyst

More Articles by Carlos Guillen

Unemployment Pain Stretched Thinner

Semiconductor Caution

A Crazy Day

After finishing 2009 better than expected, semiconductor revenues appear to be off to a good start in 2010. Strong demand for PCs and handheld devices will certainly generate opportunities for the semiconductor industry in 2010.

So far, according to Semiconductor Industry Associations (SIA) data, worldwide semiconductor revenue totaled $22.5 billion (trailing three month average) during the first month of the year, increasing 47.1 percent from the $15.3 billion achieved in the year-ago month and inching higher by 0.28 percent from the $22.4 billion posted in December. While the month-to-month increase may seem miniscule, it should be noted that the average contraction in this period is approximately 2.75 percent (calculated for the last ten years), which basically means that the January revenue figure was actually better than it should have been.

We are seeing strong demand for PCs and handhelds in 2010. In fact, most recently, market research firm Gartner increased its 2010 worldwide PC shipments to 366 million units, up 19.7 percent from PC shipments in 2009. This forecast was actually significantly higher than Gartner's December forecast calling for 13.3 percent shipment growth in 2010. Moreover, according to DRAMeXchange, demand for cell-phones is expected to be very strong, with shipments increasing by 10.5 percent to 1.61 billion units in 2010. Demand for smart-phones will be an important driver of overall cell-phone shipments, with units shipped expected to increase by 28.6 percent to 220 million. As a result, mobile DRAM bit demand is expected to increase by 71 percent in 2010.

It is also worth noting that growth in emerging markets is also supporting overall semiconductor revenue growth. In fact, while overall semiconductor revenues only increased by 0.28 percent month-to-month in January, revenues from Asia-Pacific actually increased by 2 percent. It is apparent that growing investments in communications infrastructure is fueling demand for a host of semiconductor components in this region.

I believe 2010 will be a good year for the semiconductor industry as demand for PCs and handhelds will continue to boost revenues. Moreover, improving technologies are allowing the development of new products that are creating new markets. Some of these new market makers include devices such as net-books and tablets. As such, I expect revenue in 2010 to grow by 16.5 percent, up from our prior estimate of 15.5 percent. March quarter revenues should sequentially decline along with seasonality, decreasing approximately 2.87 percent. And if the economy recovers faster than expected, semiconductor revenues may come better than expected again.

Carlos Guillen
Wall Street Strategies