NEW YORK ( TheStreet) -- The semiconductor-equipment market's recovery, which we pointed out last week appears to have begun, will exhibit a U-shaped trend, based on proprietary leading indicators. Our proprietary leading indicators, which determine inflection points in economic activity and which we utilize to show turning points in semiconductor-equipment sales, have turned positive for the past three months and are exhibiting U-shaped growth so far. Based on past cycles, there is a corresponding shape to the semiconductor-equipment market, so we postulate that the growth will also exhibit a U shaped behavior. For 2009, we forecast that the semiconductor equipment market will drop 46%. Most importantly, based again on our proprietary leading indicators, growth will continue through 2012, increasing 20% in 2010 and 49% in 2011.
Objective, concrete evidence comes from the positive activity in our proprietary leading indicators in the U.S. Both our long and short indicators turned up in late 2008, pointing to a business recovery cycle and giving visibility that the days of the recession are numbered. Semiconductor-equipment companies are reporting sequential gains in revenue. KLA-Tencor ( KLAC) reported that new orders for the fourth quarter were $327 million, an increase of 19% over thre third quarter, while Novellus ( NVLS) reported that second-quarter 2009 bookings were $111.2 million, up 43% off the low the company saw in the first quarter. Both noted that foundry activity had increased. KLA-Tencor's foundry customers comprised 53% of semiconductor systems orders in the fourth quarter vs. 40% in the third. Singapore-based foundry Chartered Semiconductor ( CHRT) raised its 2009 capital budget forecast by a third on growing demand, and we expect similar positive activity coming from Taiwan-based foundries Taiwan Semiconductor ( TSMC)and United Microelectronics ( UMC) as they report this week. Foundries have been increasing market share over the past 10 years as fabless chip designers, with a clever chip design, can enter the market with nothing more than a PC and design software. Several semiconductor manufactures have shuttered their own fabs to save costs and have become fab-lit by contracting these foundries to manufacture chips for them.