Another record high sales:
Global chip sales recorded another historical high of US$23.6 billion in April 2010 without showing any signs of abating. The continuous uptrend in sales was mainly attributed to 3G wireless communications and consequent investment in infrastructure and recovery of demand from the enterprise, automotive, and industrial sectors. Asia Pacific region remained the growth driver in sales, supported by recovering demand from America. EU experienced the slowest growth in sales, likely due to its own economic problems. Having said that, EU remains a small portion of global demand at 13.1%. AsiaPac is the highest contributor to global sales at 54.5% followed by America (16.7%) and Japan (15.6%).
Outlook remains bright from higher equipment spending, scarce capacity and continued strong demand
Owing to lack of capital investments during the market downturn in 2008-09 in addition to capacity reduction, demand is outstripping supply during the economic recovery with utilization rate surging from 56% in 1Q09 to 94% in 1Q10. Consequently, we are seeing chip players around the world announcing massive capital investment plans this year to cater for the huge demand, as evidenced by announcements by chip manufacturers such as GlobalFoundries, TSMC, Samsung and Hynix on increasing capital spending by a few billion dollars to boost their capacities. This will further buoy semiconductor equipment spending. In addition, book-to-bill (semiconductor equipment) continued to stay above parity since Jul 09 which signals greater demand for semiconductor equipments and products.
With so many new products such as IPAD, Windows 7, Intel I3/I5/I7, 3G communication devices like IPhone, BBerry, Nokia and HTC coming into the market, the entire technology supply chain could benefit from this wave of new accessories. Tech research house such as Gartner is forecasting 20% growth in semiconductor sales.
Backed by all the above factors, outlook for tech companies remains upbeat and should benefit tech stocks like Unisem, MPI, Eng Teknologi, Notion, Dufu and JCY.
For earlier post on semiconductor, click here.