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Look ahead to Oct. 2010 global semicon sales: Cowan LRA model

November 15, 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.

October 2010’s “actual” global semiconductor sales is scheduled to be released by the WSTS, via its monthly HBR (Historical Billings Report), on or about December 3rd.

(Note: The WSTS will supposedly publish its annual Autumn forecast numbers on Nov 30th. This is a deviation from its past, normal practice when it had been typically released during the middle of November. The SIA’s Fall annual forecast announcement was published earlier, on Nov. 4, 2010).

It should be highlighted that October’s “actual” sales result will play a role in whether the overall year 2010 sales reaches at least $300 billion, thereby achieving a global yearly semiconductor industry sales breakthrough (historical high).

Anticipating the upcoming October sales release by the WSTS, Cowan wants to demonstrate an analysis feature of the Cowan LRA Model for forecasting worldwide semi sales; namely, the ability to provide a “look ahead” scenario analysis for 2010’s global semi sales forecast as a function of next month’s (in this case October’s) “actual” global semi sales estimate in order to carry out a sensitivity assessment on attaining the $300 billion sales milestone.

The specifics of the scenario analysis are discussed in the following paragraphs and summarized in the scenario analysis matrix table.

Source: Cowan LRA model.

Source: Cowan LRA model.

In order to demonstrate this capability, an extended range in possible October 2010 “actual” sales was selected; in this particular scenario analysis, a sales range from $22.89 billion to $26.64 billion in increments of $0.25 billion was chosen as listed in the first column of the table.

This estimated range of “actual” sales is “centered around” the projected October sales forecast estimate of $25.143 billion as determined by last month’s (based upon September’s sales number) model run. The corresponding October 3MMA sales forecast estimate is projected to be $26.65 billion (assuming no or minor revisions to either August’s or September’s published sales numbers by the WSTS).

The overall year 2010 sales forecast estimate for each of the assumed October sales estimates over the pre-selected range of ‘actual’ sales estimates is calculated by the model, and is shown in the second column of the table.

The third column reveals the associated yr-o-yr sales growth estimates compared to year 2009’s sales result (of $226.3 billion).

The fourth and fifth columns show the corresponding October 3MMA, three Month Moving Average, sales estimate and the related year-on-year sales growth relative to October 2009’s 3MMA sales (of $21.963 billion), respectively. Finally, the sixth column lists the model’s Momentum Indicator, MI.

Therefore, as the attached scenario analysis table lays out, depending on the actual WSTS to-be-released October 2010 global semi sales number, the forecasted 2010 sales estimate, as determined by the model, could vary between $299.8 billion and $304.3 billion, while the corresponding 2009 to 2010 sales growth estimate would vary between 32.5 percent and 34.5 percent, respectively.

Cowan has purposely extended the selected range of ‘actual’ October sales numbers downward in order to capture the $300 billion “barrier” as the lower bound in the scenario analysis forecast matrix because of the pivotal role that October’s ‘actual’ sales would play in reaching this milestone sales result.

Note: Last month’s previously published Cowan LRA Model’s 2010 sales growth forecast estimate, which was based upon September 2010’s ‘actual’ sales (of $29.372 billion), came in at 33.7 percent based upon the model’s sales forecast estimate of $302.646 billion.

Using this analysis capability, the model provides a “sensitivity output” of the “expected” 2010 sales forecast (and yr-o-yr forecasted sales growth) as a function of the yet-to-be-announced October “actual” sales number.

Therefore, using the table, one can a-priori “select” an October sales number (in the range shown) and immediately see what the model would predict for a 2010 sales forecast estimate along with its corresponding sales growth expectation in advance of the actual (to-be-published) ‘actual’ October sales number.

Stay tuned for the WSTS to publish (anticipated on December 3rd, 2010) the October 2010 ‘actual’ sales number. One can then easily ascertain the model’s latest forecast outlook as abstracted (or extrapolated) from the provided table even before the model is run. Cowan will subsequently publish the updated forecast numbers based upon October’s ‘actual’ sales result.

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