This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

A Better Forecast for Semis Growth

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( TheStreet) -- STMicroelectronics (STM - Get Report), rose 7.13 % Monday, with (STM.PA) up 6.44%, and (STM.MI) up 5.67%, NXP Semiconductor (NXPI - Get Report) rose 5.88%, ARM Holdings (ARM.L) lifted 6.58%, Kopin (KOPN) gained 5.80%, Entropic Communications (ENTR - Get Report) rose 5.56%, Infineon Technologies ( gained 5.35%, Inphi Common Stock (IPHI - Get Report) rose 5.01% and Silicon Image (SIMG) was up 4.72%.

Forecasts for semiconductor growth for 2011 have been confusing and erratic all year, but the consensus is that growth projections have slowed over the past few months. For example, Gartner forecast worldwide semiconductor growth at 5.1% in June, down from its first-quarter projection of 6.2% growth for 2011. Gartner lowered its forecast to -0.2% in September.

In June, IMS iSuppli forecast a 7.1% growth, up from 7.0% in the first quarter. Growth was lowered to 4.6% in August and 2.9% in September.

Follow TheStreet on Twitter and become a fan on Facebook.

The Nasdaq Composite is heavily weighted in technology and Internet stocks, and I was curious about the correlation between Nasdaq and semiconductor growth and forecasts. A search on the Internet suggests that Nasdaq is a leading indicator. But is it when compared to historic growth of semiconductor revenues?

In the chart below I plotted the Nasdaq Composite against semiconductor sales over the past 16 years, since 1995, when the market research company I started, The Information Network, celebrated its 10th Anniversary. The chart below shows that it is clearly a "concurrent indicator" instead of a "leading indicator."

In recent times the Nasdaq can be argued to be a "lagging indicator."

If we compare the forecasts by Gartner and IMS iSuppli -- forgetting that they tend to give forecasts in tenths of percents to make numbers look credible only to come out a short time later with changes in the units of percents -- if the Nasdaq was a "leading indicator", then the forecasts seem plausible.

But if Nasdaq was a "concurrent" or "lagging" indicator, then the semiconductor companies should enjoy a less-than-dreary year. Keep in mind that semiconductor billings according to the Semiconductor Industry Association are up 4.4% through August 2011 compared to the same period last year.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
ENTR $2.99 1.01%
IPHI $17.77 -0.34%
KOPN $3.60 2.27%
NXPI $99.75 -0.61%
SIMG $7.28 0.00%


DOW 17,698.18 -77.94 -0.44%
S&P 500 2,059.69 -8.20 -0.40%
NASDAQ 4,880.2280 -20.6570 -0.42%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs