SAN FRANCISCOA financial analyst said Thursday (April 30) that the outlook for second quarter PC builds is improving and that Asian chip distributors are reporting better-than-expected demand for semiconductors across a number of product markets.
Second quarter PC builds are now on target to grow 7 percent from the first quarter, said Craig Berger, an analyst with FBR Capital Markets, citing checks with the five notebook ODMs and top four desktop motherboard makers.
Berger said in a research note that second quarter notebook builds are now projected to be up 14 percent from the first quarter, higher than the 10 percent growth Berger projected a month ago. Second quarter desktop PC shipments are projected to decline 2 percent quarter-to-quarter, Berger said, in line with his previous estimate.
In light of the improving PC build situation, Intel Corp.'s internal second quarter revenue target, which calls for sales to be roughly flat with first quarter sales of $7.1 billion, may be conservative, Berger said. He said Intel should grow revenue by a minimum of 3 to 4 percent in the second quarter.
Beyond the PC space, Berger said checks with Asian chip distributors also point to better-than-expected demand for many chip categories. The checks show second quarter shipments growing 10 to 15 percent from the first quarter, better than FBR's forecast last month of 5 percent growth, he said.
FBR believes the shipment strength is the result of several factors, Berger wrote, including rush orders due to low inventory levels and seasonal demand ahead of the second half holiday build. Shipment strength also points to a modestly improving end demand for consumer products such as LCD TVs, DVD players and smartphones, he said.
Distributor inventories are currently at or near targeted levels of 40 days and are slightly better than FBR's month-ago checks, which then cited an average of about 45 days of inventory, Berger said.
"Our contacts tell us that the communications chip sector is still strong at this time, with lead times extending by two weeks due to handset and smartphone demand from China," Berger wrote.
Demand for communications, handset and PC chips remains healthy, Berger said. Demand for chips for consumer and automotive applications is also starting to ramp, he said.
Earlier this month, Intel President and CEO Paul Otellini said PC sales appeared to hit bottom during the first quarter and were seen as returning to to normal seasonal patterns.
Berger has reported improving PC builds for three consecutive months.
In addition to Intel, a number of other suppliers should benefit from the improving PC build scenario and grow the PC portions of their business by at least 5 percent in the second quarter, Berger said. He pointed to a handful of companies that FBR covers with upside, including Marvell Technology Group Ltd., LSI Corp. International Recitfier Corp. On Semiconductor Corp. and Fairchild Semiconductor International Inc.