Semis sales have good and bad news

Gartner analyst Richard Gordon said financial reporting by semiconductor vendors for the first quarter of 2008 shows a ‘mixed bag’ of company performance, but no sign of a market downturn induced by the sharp slowdown in the US economy. “If anything, the seasonal slowdown in semiconductor sales in the first quarter was milder than expected,” he claimed, “given concerns about the potential for both consumers and businesses to rein in spending on electronics. In fact, the important pc and cell phone sectors did better than forecast in the first quarter, suggesting healthy annual growth in unit terms, at least for 2008.” Whilst sales grew, so too did inventory levels. “Unless a trend reversal occurs in the second quarter of 2008,” Gordon continued, “this will soon give cause for greater alarm.” Gartner believes the second quarter of 2008 will confirm the strength – or possible weakness – of end market demand and give further clues about the likely impact of macroeconomic conditions on the electronics and semiconductor markets. In Gordon’s view: “Semiconductor vendor guidance suggests we should expect flat sequential quarterly growth in the second quarter of 2008, which would put sales at about $127bn for the first half. Assuming a normal annual profile of a stronger second half of the year, annual sales are projected at about $265bn by WSTS measure. This would put annual growth at about 4%, which is in line with our most recent forecast update.”