7/9/2010
By Carlos Guillen, Semiconductor Analyst

Now that the June quarter is over, I continue to be optimistic that the semiconductor industry will continue its growth trajectory. PC and handheld demand has held up well and will most likely greatly contribute to worldwide semiconductor sales in 2010.

Most recently, Semiconductor Industry Associations (SIA) data indicated that the revenue momentum was continuing. So far, semiconductor revenues are already turning out to be much better than I expected. In fact, according to SIA data, global semiconductor revenue in May reached a record high of $24.7 billion, increasing month-to-month by 4.5 percent, after increasing 2.21 percent in April. Revenue during May typically increases by approximately 1.5 percent, so growth in May was much better than the norm. And if revenue in June were to remain at the same May level, this would imply quarterly growth of approximately 6.9 percent from that of the prior quarter, which would be much higher than my prior estimate of 1 percent.

Some of the components that gave semiconductor revenues its robust growth were strong demand for PCs, cell phones, IT components, industrial applications, and autos. I continue seeing strong demand for PCs and handhelds in 2010, and 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 smart-phone, net-books, and tablets. These new devices will also create opportunities for sales of memory components during the second half of 2010.

It was encouraging to see that growth occurred in all regions, even in Europe. Also, despite concerns with government debt, decreasing consumer confidence, and increasing possibility of less government spending, semiconductor revenue continued its momentum. Nonetheless, these concerns continue to pose as significant risks in the remainder of the year.

The semiconductor industry should benefit from an improving economic backdrop and from a corporate sector that is slowly but surely ramping up spending. At the moment, I see minimal downside risk in terms of corporate spending and am much more optimistic about a sharp upturn in IT spending in the second half of 2010. All signs are indication that world economies are, in general, improving. Despite the current debt crisis, the European economy grew better than expected during the March quarter. And China, of course, will be the leader of the pack in terms of GDP growth, providing continuing momentum to semiconductor revenues. As such, I believe the semiconductor revenue momentum will continue, and I expect semiconductor revenue during the June quarter of 2010 to increase sequentially by 4 percent, up from my prior estimate of 1 percent. Total revenues in 2010 should grow by 29 percent, a significant improvement over my prior forecast of 19 percent.

Carlos Guillen
Wall Street Strategies