The Upturn of Semiconductor Industry

Published:2011/11/7 23:43:00 Author:Phyllis From:SeekIC

Taiwan Semiconductor Manufacturing Corporation is starting to see signs of a turn in the market despite its sequential decline in the past two quarters. Many electronics equipment and chip companies have strived to burn off inventory because of global economic situation during 2011, and that process has now reached close to a minimum.

TSMC may demonstrate an improving gross margin in the fourth quarter. Although the revenue of 2011 may not increase as much as 9 percent in 2010 as TSMC expected to grow 1 percent versus 2010.

With globally uncertainties especially the European debt crisis are setting to continue into 2012 and suppressing spending in a number of electronics sectors, TSMC has made an estimate of a 3 to 5 percent global annual chip market growth in 2012.

The macro-economics are not good, but the cloud, mobile internet and internet-of-things are stimulating the industry. The company said the supply chain pipeline is so empty the market can only turn in one direction, stimulated by resilient demand in sectors related to mobile and internet applications.

A report said the semiconductor industry downturn has hit bottom, and phase one of an upturn for chips has begun. Phase one of the semiconductor upturn refers to orders stabilizing, as increased signs of a fundamental bottom and increasing likelihood of revisions to Wall Street estimates for chip firms during the first half of 2012.

Over the past few weeks, several chip companies and distributors, including Fairchild Semiconductor International Inc., Texas Instruments Inc. and Arrow Electronics Inc. have stated that they are experiencing a bottom in order rates. Arrow expects semiconductor manufacturers should see orders improve in the first quarter of 2012 and could strengthen further in the second quarter of 2012.

Chip sales data from the Semiconductor Industry Association combined with fourth quarter guidance from chip firms indicates that semiconductor units should be flat to down during the second half of 2011, far below the expected 15 percent unit growth for PCs and 8 percent unit growth for handsets. This could be the hard evidence that semiconductors are under-shipping end demand. This should lead to increase order rates in the first quarter of 2012, after end demand stabilizes due to inventory replenishment.

Phase two of the upturn would commence late in the fourth quarter this year when semiconductor companies stop lowering estimates. Phase three of the upturn is expected to occur in the first quarter of 2012 when several chip companies report improving order rates as demand stabilizes and inventory needs to be replenished.

Late in the first quarter of 2012 the industry should enter phase four of the upturn, when semiconductor companies raise expectations on the back of continued improvement in order rates. The consensus estimates are expected to rise in last first quarter of 2012 as semiconductor companies raise guidance.

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