Skip to main content

Semiconductor sector still solid - headlines from the frontlines

Semiconductor ETFs have been on the rebound lately. Here’s a roundup of semiconductor news from the Digitimes web site that illustrates what’s going on in the sector.

12-inch wafer prices to rise 10-20% in 2Q10

Demand is sufficient to allow suppliers to foundries to raise their prices. The article goes on to say that TSMC and UMC have both seen full utilization rates at their 12-inch fabs, thanks to orders for FPGA, GPU, network and wireless applications, according to the sources. Suppliers have kept capacity at recession levels while ramping prices. Pricing power is a good indicator of growth in demand so, from that point of view, this can be considered a positive.

Supply chain remains tight amid conservative capacity management, says iSuppli

"As iSuppli has been reporting for several months, the recovering economy has brought renewed demand. However, component suppliers have yet to jump in with both feet when it comes to ramping up capacity," These companies are just enjoying increasing margins and enjoying a little pricing power for the first time in a couple of years.

Chip-gear book-to-bill almost flat in February 2010

OK, the sequential month-over-month numbers are flat and the lack of improvement is disappointing. But when looking at the book-to-bill ratio from a year-over-year perspective, the improvement is dramatic.And this is from a sector that has been  really devastated. When chip demand cratered, equipment sales went down the toilet. The fact that chip manufacturers are finally buying equipment to increase productivity and capacity is a good sign of confidence in future prospects for chip sales.

Intel sees chipset demand from motherboard makers exceed CPU shipments by 20%, say sources

Motherboard clients of Intel have been increasing orders for chipsets recently, causing chipset shipments to rise to a level 20% higher than processor shipments. This implies PC sales are still on the rise, probably partially due to the Windows 7 upgrade cycle.

Chip industry to grow 7% in 2011, predicts TSMC chairman

The global semiconductor industry will grow by 7% in 2011, and is poised to post a CAGR (compound annual growth rate) of 4.2% during the period from 2011-2014, according to Morris Chang, chairman of Taiwan Semiconductor Manufacturing Company (TSMC), speaking at the recent Global Semiconductor Alliance (GSA) summit.

Considering how the sector was in free-fall a year or so ago, this shows that growth is not a flash in the pan. These expectations for steady improvement contradict calls for a double-dip

DRAM spot prices keep rising

Spot prices for mainstream 1Gb DDR2 and same-density DDR3 have recently rallied to approach the US$3 mark, reflecting demand is outstripping supply.

This is yet another indication that demand for chips is robust and even the usually over-supplied and lowly memory chip is allowing memory makers to raise prices for the first time in ages.

How to play it –-

I always look to the ETFs in a situation where there seems to be something positive going on across the whole sector. Here are a few for your consideration:
  • IGW, the Semiconductor iShares S&P/GSTI Index Fund
  • XSD, the SPDR S&P Semiconductor Index ETF
  • SMH, Semiconductor Holders
  • PSI, PowerShares Dynamic Semiconductors Portfolio
  • USD, ProShares Ultra Semiconductor ETF

    Disclosure: modest position in USD


    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 …

    Unlock Stock Market Profits - Key #1

    This is the first in an ongoing series of articles where I discuss what I feel are keys to successful investing. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. (Click here to read the original post)

    There are two basic steps to investing. First, you need to find stocks that seem to have some potential. Then you have to determine whether these stocks are actually good investments. There are many stocks that at first glance look interesting, but further research reveals that there are too many negatives to warrant taking a position.

    This first post in the series starts at the beginning: getting good investment ideas.

    Key #1: If something special is happening to a stock, it will be reflected in some kind of unusual activity in the markets.

    As individual investors, we will never be the first to know; however, unusual activity can be an early sign that allows us to follow the Wall Street professionals and …

    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.