Chip Sales Beat October Expectations

NEW YORK — Global semiconductor revenues reached $26.1 billion, down 11 percent month-over-month, but above a forecast of a seasonal 13 percent decline, according to figures from the Semiconductor Industry Association.

All segments of the semiconductor industry except Flash posted higher-than-expected numbers for the month of October, SIA said. Those segments exceeding expectations include DRAM, microprocessors, analog, microcontrollers, and DSPs.

The overall outlook for semiconductors remains “bullish [despite] a slow macro setting,” according to an analyst note from Ross Seymore, research analyst for Deutsche Bank Markets Research.
Chip revenue so far this year is growing 4 percent despite inconsistent market performance. “The better than expected October SIA data continued this year’s choppy trend of alternating positive/negative surprises,” Seymore notes.

Some of the shifts are business as usual. “From a risk perspective, the semi sector is inherently cyclical and therefore volatile as
macro/semi demand as well as inventory gyrations are ever present.” Seymore said.

The current 4 percent growth is significantly below Deutsche Bank’s full-year forecast for 6 percent year-over-year growth. “However,” Seymore adds, “given the easier comparisons in 4Q, normal monthly seasonality for the remainder of the year would achieve (if not slightly exceed) our forecast. Within this slow environment, we believe investors should focus away from the already expensive high quality, broad-based names (Analog, Programmable Logic Devices etc.) and move toward company’s that offer… growth drivers or those that can generate earnings leverage with minimal revenue upside.”

Seymore cited some preferred brands within the market, namely Buy-rated Intel Corp., Broadcom, Avago, Freescale, as well as Fairchild, ON, Monolithic Power Systems, Magnachip, and Maxlinear.