Take my wafers, please...

Semiconductor stocks have been flying lately, apparently reinforced by Intel's excellent earnings report.

Reading the Intel conference call transcript, however, there were some notes of caution sounded by CEO Paul Otellini. He was positive on the remainder of the year but he was careful not to get carried away in his enthusiasm.

Now comes another sign that maybe investors should ratchet up that sense of caution. Reading the Digitimes.com web site, there was a small article that raises the hair on the back of my neck. Here's what they said:

Taiwan Semiconductor Manufacturing Company (TSMC), alarmed by its rising inventory level, has demanded IC design houses take delivery of their ordered wafer starts before placing new orders, according to industry sources.

The company is seemingly worried by the possibility that their clients might have been overbooking. The article went on to say that TSMC's inventory of analog ICs is currently 50% higher than its safe level, while inventories of both network- and consumer-related IC segments have also exceeded their safe levels by about 20%, which has sent TSMC undertaking inventory control measures.

So the question I have is whether this is a company-specific situation or whether it will turn out to be the beginning of an industry-wide slowdown. If inventory is building up at the source of the semiconductor supply chain, it doesn't bode well for the the chip companies that are further up the ladder. Are they seeing demand dry up? Is this just a temporary speed bump due to modest overbooking? Or is the tech rally running out of gas?

If this situation persists or spreads to other chip manufacturers, it might be time to start looking at the ProShares Ultra Short Semiconductor ETF (SSG).

Comments

Brazil - in a bubble or on a roll?

A couple of years ago, no one recognized the real estate bubble even though it was under everyone's nose. Now, analysts and bloggers are seeing bubbles everywhere they look. One of them, they say is in Brazil whose Bovespa stock market index has doubled in the last 12 months. Does the bubble accusation hold water? I don't think so and here are 7 reasons why Brazil is by no means a bubble economy: Exports have held up over the past year thanks to demand from China for Brazil's soya exports and iron ore. This was helped by the the Brazilian government's drive to improve trade links with Asia and Africa. Export diversification, spurred by a more active trade policy and increased focus on "south-south" trade under current president Lula, helped mitigate the decline in demand from OECD (Organization for Economic Co-operation and Development) countries A "sensible" economic framework has been in place since the 1990's. This has included inflation

Trade Radar gets another update

Some of our data sources changed again and it impacted our ability to load fundamental/financial data. In response, we are rolling out a new version of the software: 7.1.24 The data sourcing issues are fixed and some dead links in the Chart menu were removed. So whether you are a registered user or someone engaged in the free trial, head over to our update page and download the latest version. The update page is here: https://tradingstockalerts.com/software/downloadpatch Contact us if you have questions or identify any new issues.

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 professional

the Trade-Radar + TradingStockAlerts blog

Search This Blog