Thursday, March 8, 2012

Chip sales slipped 2.7 percent in January - One final thought

Dr. Robert Castellano, The Information Network, USA.

NEW TRIPOLI, USA: I mentioned in the last two Insight articles that there will not be an uptick in semiconductor sales through Q2 2012, based on our Proprietary Leading Indicators (PPLs) and their correlation with semiconductor revenues.

I wanted to drive home our analysis with one more piece of data based on rising gas and oil prices, and how they can impact semiconductor sales, and why you shouldn't pay any attention to any forecasts that are projecting a growth in the semiconductor market before mid-2012, and why you need to subscribe to our PLLs, which are supplied free to our Annual Subscription Service subscribers.

I said last time that semiconductor sales were directly related to macroeconomics (the basis of our PPLs) and the chart below shows semiconductor sales going back to 1972 and the correlation with GDP. I've added estimates for GDP and semiconductor sales consensus for 2012 for illustration.Source: The Information Network, USA.

I've added the chart below that shows the correlation between GDP and Oil prices. Clearly there is an uncanny correlation.Source: The Information Network, USA.

The table below shows the effect of the price of oil on GDP. In other words, oil is now at $110 a barrel. If it increases to $120 per barrel, it will affect the world GDP by -0.4 percent. If it goes to $150 per barrel, it will affect the world GDP by -1.6 percent. Go back to the first chart and substitute that number for 2012 and watch for a huge dip in semiconductor sales.Source: The Information Network, USA.

The final chart below shows the impact on our pockets.Source: The Information Network, USA.

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