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Cowan LRA model: Global semicon sales forecast update based on Aug. 2010’s actual sales

October 5, 2010

This is a continuation of my coverage of the fortunes of the global semiconductor industry. I would like to acknowledge and thank Mike Cowan, an independent semiconductor analyst and developer of the Cowan LRA model, who has provided me the latest numbers.

This Monday, (10-04-10) the WSTS posted the August 2010 global semiconductor sales report (Historical Billings Report, HBR) on its website. Therefore, with the WSTS having released its actual August 2010 global semiconductor sales number, Cowan has provided the latest monthly update to the Cowan LRA Model’s derived forecast numbers.

The updated sales forecast estimates for 3Q, 4Q and 2010 decreased very slightly from the previous month’s forecast estimates as summarized below.

The actual August 2010 global semiconductor sales published by the WSTS came in at $25.358 billion which is:
* 30.8 percent higher than 2009’s August sales of $19.175 billion;
* Up 3.2 percent from last month’s (July) sales of $24.570 billion;
* And lower (by $0.090 billion, or down 0.35 percent) compared to last month’s (July’s projection) sales forecast estimate, that is, $25.448 billion;
* The Cowan LRA Model’s Momentum Indicator, MI, went slightly negative (-0.35 percent) compared to last month’s plus posture (at +5.0 percent), as discussed below.

Cowan’s momentum indicator
August 2010’s actual semiconductor sales (of $25.358 billion) came in slightly lower (by $0.090 billion) than the model’s last month’s August 2010 sales forecast estimate (of $25.448 billion) representing a minus 0.35 percent delta comparing August 2010’s actual sales number (published by the WSTS) to the projected forecast estimate “put forth” by the Cowan LRA forecasting model and reported last month. This percent delta represents the Cowan LRA Model’s MI.

The MI is defined as the percent difference between the actual sales for a given month — in this case August 2010’s just published actual global sales of $25.358 billion and the forecasted sales estimate for August 2010, that is, $25.448 billion, which was calculated and published last month.

The MI can be either positive or negative and is a measure of the percent deviation of the actual monthly sales number from the previous month’s prediction derived by the model’s linear regression analysis of the past 26 years of historical, actual monthly global “sales experience” as gathered and published, each month, by the WSTS.

Note: September 2010’s sales forecast estimate is projected to be $31.402 billion.

Latest monthly update
Cowan's LRA model.

Cowan's LRA model.

The latest monthly update to 2010’s global semiconductor sales forecast estimate as determined by the Cowan LRA forecasting model notched down very slightly to $305.406 billion corresponding to an updated projected 2010 year-over-year sales growth forecast estimate of 34.9 percent.

These latest forecasted 2010 sales and sales growth estimates decreased marginally from last month’s (July) reported sales and sales growth forecast estimates of $305.729 and 35.1 percent, respectively.

Thus, the full complement of the latest, updated sales and sales growth forecast estimates for 3Q, 4Q and 2010 are detailed in the table immediately below along with the 1Q’s and 2Q’s actual reported sales numbers.

The second table shows the corresponding results from last month’s model run in order to compare the sequential forecast estimate numbers, namely August versus July.

Source: Cowan's LRA model.

Source: Cowan's LRA model.

Additionally, next month’s (Sept. 2010) global semiconductor sales forecast estimate is projected to be $31.402 billion, which would “translate” to an August 3MMA sales forecast estimate of $27.110 billion assuming NO (or very minor) revisions in either July or August sales numbers as part of the WSTS’s September sales report.

The 3MMA sales is normally published by the Semiconductor Industry Association (SIA) (using WSTS sales numbers) as part of its monthly press release that characterizes the semiconductor industry’s monthly sales and sales growth posture.
The SIA’s September 3MMA press release is scheduled to be announced on Monday, November 1, 2010.
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