SAN FRANCISCOFollowing a sharp recovery in late 2009 and into 2010, semiconductor industry unit volumes should still grow another 15 to 20 percent between now and the end of the year, according to analysts at Benchmark Equity Research.
Chip unit volumes have improved by more than 75 percent since reaching a cyclical trough in January 2009, according to a report by Gary Mobley, an analyst at Benchmark. Over the same time period, the Philadelphia Semiconductor Index has rallied by a similar amount, Mobely said.
While most industry analysts are calling for overall semiconductor growth of 20 percent this year, Benchmark analysts believe that growth of 22 to 24 percent is more likely, according to the report.
Inventories for some types of chipsincluding memories, some analog and programmable logic chipsincreased during the first quarter of 2010, but Benchmark said days of chip inventory held in the electronics production supply chain remain below the long-term average. Assuming the global economy continues to slowly improve, monthly IC unit shipments should range between 16 million and
17 million during the third quarter, up from 8 million units in January 2009, according to Benchmark.
Benchmark continues to recommend that investors invest in semiconductor companies. The firm said it's top-rated chip firm buys are MIPS Technologies Inc. and Broadcom Corp.
While many investors believe the rebound in chip sales during the past several months has simply been a function of inventory replenishment by OEMs, electronics manufacturers and chip distributors, Benchmark believes the recent recovery in semiconductor sales is not solely a function of an increase in days of semiconductor inventory held in the production supply chain. "We believe the rebound in semiconductor sales will continue to be a function of a normalization of electronics goods consumption and inventory," Mobley wrote.
Benchmark cited several trends that the firm expects will drive semiconductor consumption growth, including the development of smart grids, growth of Internet traffic, adoption of solid state drives, deployment of 4G wireless and continued growth in smartphones, and short range connectivity.
Benchmark also expects industry wide fab utilization rates to remain stable. After slipping to below 58 percent in the first quarter of last year, fab utilization rates improved to89 percent in the fourth quarter of the year, Benchmark said. While total capital expenditures for semiconductor manufacturers should rise 40 to 50 percent in 2010, manufacturing utilization rates should remain close to the 90 percent level, according to Benchmark. Considering seasonal sales trends and the amount of production capacity being added, first-half 2010 chip manufacturing utilization rates should be about 85 to 90 percent, while second-half utilization may slightly exceed 90 percent, Benchmark said.