Chip Sales Healthy for Now
09/02/08 - 01:14 PM EDT
Alexei Oreskovic
SAN FRANCISCO -- Global chip sales increased 7.6% in July, as demand for PCs, cell phones and other consumer electronics held up in the face of a slowing economy.
The monthly sales tally by the Semiconductor Industry Association, a trade group, is the latest sign that business for chipmakers remains on track despite the Street's generally bearish view of the sector's prospects amid a weak economic climate. The Philadelphia Stock Exchange Semiconductor Sector Index , an index of 18 large semiconductor stocks, is down roughly 31% from its 52-week high. The Soxx index was up 0.3% in midday trading Tuesday. According to the SIA, worldwide semiconductor sales totaled $22.2 billion in July, vs. $20.6 billion in July 2007. Many chipmakers, including Intel(INTC Quote - Cramer on INTC - Stock Picks), Broadcom(BRCM Quote - Cramer on BRCM - Stock Picks) and Altera(ALTR Quote - Cramer on ALTR - Stock Picks), delivered solid second-quarter results. But even companies doing well are concerned about the uncertainty hanging over the current business environment. Citigroup chip analyst Glen Yeung cautioned that the SIA's latest chip sales data was less inspiring than it might seem at first glance. In a note to investors Tuesday, Yeung noted that the 7.6% year-over-year sales growth in July represents a deceleration after five consecutive months of increasing year-over-year revenue growth - June chip sales, for instance, were up 8% year-over-year. And he warned of signs that chip inventory levels could be getting too high. Yeung also noted that consumers appear to be favoring lower-priced products, such as the new breed of ultra mobile PCs, epitomized by Asus' Eee PC. With the worldwide economy slowing, Yeung warned that chipmakers could feel more pricing pressure -- a trend the chip industry has thus far avoided save for the volatile memory chip business.
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