Skip to main content

Chip makers and semi equipment manufacturers on divergent paths

I have come out bearish on the semiconductor equipment industry before and the latest numbers from SEMI do nothing to change my attitude.

The chart below shows the dismal trend. Bookings are about 8% less in April than in March. More ominously, the April 2008 number is 32% lower than April 2007. Associated with this, the book to bill ratio has now dropped to 0.81, indicating orders are coming in at a slower rate than shipments are going out. In general, growth in the industry can be considered to be flat to down.

We have in the past pointed out that over-capacity in the memory industry is keeping a lid on semiconductor equipment sales growth. On the flip side, red-hot growth in the solar industry is providing some support to those semiconductor equipment manufacturers that offer a product in this segment. Applied Materials (AMAT) comes to mind. Without the solar mini-boom I suspect this chart would look even worse.

In contrast to the equipment makers, we have the semiconductor manufacturers themselves. Below we see a chart of worldwide chip sales.

The chart shows the usual end-of-year boom-to-bust seasonality that chip sales tend to display. It also shows the beginning of a rebound in sales in March.

Now look at the chart of the PowerShares Dynamic Semiconductor Index ETF (PSI). It almost the inverse of semiconductor sales! Note that this ETF contains a mix of chip makers and semiconductor equipment makers though the chip makers are in the majority.

The industry in general is kind of a mess. A small minority of the semiconductor equipment companies are doing well; the rest not so much. This remains a sector to avoid.

The chip makers are also turning in mixed results but at least worldwide sales are starting to show an upswing. If the consumer can afford to continue his/her love affair with electronics the upswing will continue. The semiconductor ETFs have been rallying which indicates to me that the large and mid-cap companies are finding favor with investors. There have been many disappointments among individual stocks, however, making the sector a tricky place to put money to work.

For now, the semiconductor ETFs seem the best way to play the sector, especially as the recent pullback begins to make them more attractive. Having rallied 33% from the January low, PSI, for example, is still up 27% even after the two big days of selling we saw earlier this week. I suspect it will get cheaper still and provide a more conservative entry point within the next week or two.

Disclosure: author has no positions in any stocks or ETFs mentioned in this article


NORTH American Semiconductor Equipment Industry Posts APRIL 2008 Book-to-Bill Ratio of 0.81

STATS: Global Billings Report History (3-month moving averages) 1976 -March 2008


Popular posts from this blog

Running TradeRadar on Windows 7 and Windows 8

Development of the original TradeRadar Stock Inspector software was begun back in the days before Windows 7 and Windows 8 were available.

As these newer versions of Windows have become more popular, we have heard from some users that they are having problems installing and running TradeRadar on their newer PCs.

The good news is that TradeRadar will work just fine on Windows 7 and Windows 8. All you have to do is adjust the Windows Compatibility Settings to ensure TradeRadar runs as intended.

It is recommended that you can apply Compatibility Settings when running the initial installation; however, it is also possible to apply Compatibility Settings after the program has been installed.

Prior to installation
After downloading the install program, go to the folder where you have stored the TradeRadarStkInsp_7_Setup.exe or TradeRadarStkInsp_7_PRO_Setup.exe executable. Right-click on the executable file and select Properties. Click the Compatibility tab. Adjust the Compatibility mode to …

Alert HQ has moved!

End of an era!

This site was started way back in 2006/2007 to showcase my blog posts and the Alert HQ buy signals and sell signals. Alert HQ grew to include other kinds of stock alerts including Swing Signals, Trend Busters, Trend Leaders, Cash Flow Kings and more.

In the meantime, I built a sister site, and I started using some of the same Alert HQ content over there. As a result, I am discontinuing the Alert HQ data here at

The good news, however, is that all the Alert HQ signals and stock screens are still completely free. In addition, the pages have been enhanced so that you can hover over a stock symbol and a small chart will pop up so you can get a quick look at the stock's recent price action. If you click on a symbol it will take you to a page with plenty of financial and technical analysis information (still free!) as well as a larger chart that you can play with in terms of adding or deleting indicators, moving averages, etc.

Click …

Durable Goods report for Sept just so-so but Computer segment is on fire

The Durable Goods advanced report for September 2011 was released on Wednesday.

I like to dig into the Durable Goods report because it can be useful for seeing how tech in aggregate is performing and how the sector may perform in the future. I always focus on two particular measures: shipments and new orders. Let's see how it played out last month.

Shipments -- 

I generally give less importance to Shipments since this is a backward looking measure reflecting orders that have been confirmed, manufactured and shipped. It's similar to earnings reports -- it's good to know but the data is in the past and we're more interested in the future. The following chart shows how September shipments looked for the overall tech sector:

Results for the overall tech sector were a bit weak but take a look at the next chart which tracks the Computers and related products segment:

Results here were actually quite good and, to make things even better, the previous month was revised upward.