Signs point to a short slowdown - IPI ticking up!

PHOENIX, USA: The Semico IPI has been steadily declining since May of 2010. This indicates that the second half of 2011 and at least early 2012 will be a weak semiconductor market. Excess buildout in tablets, PCs and smart phones are leading our inventory concerns. Prices in some semiconductor categories have declined over the last two months, hurting revenue, although we have continued to see unit demand remaining healthy.

Adding to the short-term cautious outlook are the general economic indicators pointing to slower economic expansion for the balance of 2011. While semiconductor sales have bucked the macroeconomic trends in the past, today, with the pervasiveness of electronics throughout our economy, macroeconomics has a significant influence on the semiconductor market.

However, there are signs that this slowdown will be short. During the last two months the IPI has shown a slight uptick, providing a cautiously optimistic outlook for the second half of 2012. While two months of data does not guarantee a trend, we believe there are additional factors supporting this optimism.