Wednesday, February 22, 2012

Where are semiconductors going in 2012?

Dr. Robert N. Castellano, The Information Network

NEW TRIPOLI, USA: Every other analyst has put their 2 cents in to forecast what is happening in the industry in 2012, so I thought I would add at least 1 cents worth.

First of all, I want to point out a fallacy in the industry - As does semiconductor sales so does semiconductor equipment sales - correct up to 2000 until the introduction of 300mm wafers, but a fallacy since then as shown in the chart.Source: The Information Network, USA.

Now for our analysis of semiconductor sales for 2012. Seems like everyone is pointing to positive growth. For example, in an article in EETimes it is quoted that "Cowan's model takes into account the WSTS figure for global chip sales in 2011 of $299.52 billion and predicts a figure for 2012 of between $306.381 and $312.381 billion in 2012 corresponding to 2.3 and 4.3 percent growth, respectively. For the four quarters of 2012 Cowan is predicting chip sales figures of $73.316 billion, $75.021 billion, $81.445 billion and $79.598 billion for Q1 through Q4 in sequence."

I can't disagree more! Not only do I find it increduluous that while they quote a huge range of 2.3 to 4.3 percent (nearly 100 percent uncertainty), they do it in thousands of decimal places like $73.316. To me, and I've only been doing this 26 years, a range of 2.3 to 4.3 percent would imply a lot of uncertainty and thus would suggest numbers such as "about $73 billion, not $73.316 billion". Heisenberg must be rolling in his grave!

Secondly, over the past 16 years we have been developing our PROPRIETARY LEADING INDICATORS (PLLs) for both semiconductor sales and semiconductor equipment sales forecast out up to at least six months, which we supply monthly to subscribers of our Annual Subscription Service. If you remember, we noted in mid 2011 that semiconductor sales would peak in Sept 2011, which they did.

Of the 40 countries we track, 15 were up, 18 down, and 7 flat through Dec. 2011 statistics. These numbers show specifically that semiconductor sales will NOT rise through Q2 2012.

More importantly, when we do our analysis we look at the overall macroeconomic conditions and find that we are at (1) the start of another surge in gasoline prices, which will drop consumer confidence a curtail consumer spending, not only in the US but worldwide, and (2) we are looking a a chance of war in Iran, which will shock the economic system, causing stock prices to drip and erase paper wealth of a lot of speculators (who should be short stocks and long oil at this juncture).

These two factors could keep semiconductor sales on a slide even into Q3, beyond the range of our correlation between our PLLs and semiconductor sales.

The chart below is an example of the correlation of our PLLs with semiconductor sales (as stated we have other PLLs for correlation with equipment sales). I have taken out 2011 data (I'm not stupid), but the chart we supply to subscribers does indeed have up-to-date data.Source: The Information Network, USA.

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