Cowan LRA model’s updated forecast for global semicon sales 2012

August 9, 2012

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.

Based on the WSTS’s June (posted August 5th, 2012) global semiconductor sales of $26.329 billion, actual sales number, the latest monthly forecast expectation for total global semiconductor sales calculated by the Cowan LRA forecasting model came in at $297 billion.

This represents a 2012 year-on-year sales growth forecast expectation of minus 0.85 percent, which declined from the previous month’s year-over-year sales growth forecast estimate of plus 0.1 percent. It is also lower than the joint WSTS/SIA Spring 2012 sales growth forecast of 0.45 percent, which corresponds to a global sales forecast estimate of $300.9 billion.

Consequently, the latest model’s forecast output is presently (based on June 2012’s actual sales) predicting negative sales growth for 2012 compared to 2011.

It should be pointed out that the model’s previous month’s forecast expectation for June was $27.65 billion. This forecasted sales (published last month) was much higher than the actual June sales result of $26.33 billion (lower by $1.32 billion or down 4.8 percent) resulting in an M.I. (Momentum Indictor) of minus 4.8, implying that the sales growth trend will be ‘mildly’ down over the near term.

Source: Cowan LRA model, USA.

Source: Cowan LRA model, USA.

Inserting June’s actual sales number into the Cowan LRA forecasting model also yields the latest updated sales forecast expectations for the remaining two quarters of 2012 and the first two quarters of 2013. These results are summarized in the table below. Also included in the table are previous month’s sales and sales growth forecast results for comparative purposes.

As displayed in Table 1, the latest projected full year 2012 global semiconductor sales forecast estimate fell to $297 billion from last month’s sales forecast expectation of $299.8 billion, a decrease of $2.8 billion.

Correspondingly, the updated 2012 sales growth forecast estimate went negative, dropping to minus 0.85 percent from last month’s slightly positive sales growth forecast estimate of plus 0.11 percent, a decrease of almost a full percentage point.

Also note that July’s actual sales estimate is forecasted to come in at $23.2 billion. Thus, July’s actual sales forecast estimate equates to a July 3MMA sales expectation of $24.15 billion, which is down slightly from June’s 3MMA sales result of $24.4 billion. It should be highlighted that this forecasted July 3MMA sales number assumes no (or very minimal) sales revisions to either May or June’s just published sales results by the WSTS.

Additionally with the ‘wrap up’ of the second quarter sales results, year-to-date sales for 2012 (cumulative sales through June) came in at $143 billion compared to last year’s year-to-date sales of $150.6 billion. This coincides to a 2012 year-to-date sales growth of minus 5.1 percent.

This implies that global semiconductor sales for the second half of 2012 must demonstrate some significant strength to reach last year’s sales result of $299.52 billion in order that the full year’s 2012 sales growth is to break even with last year’s sales, let alone show a mildly positive sales growth for the year.

To be more precise, the latest Cowan LRA model’s sales forecast expectation for the second half of 2012 is predicted to come in at $154 billion, which would correspond to a first to second half sequential sales growth (1H => 2H) of 7.7 percent. Therefore, the second half global semiconductor revenue would need to grow sequentially by more than 9.5 percent to assure positive sales growth for 2012 relative to 2011.

Remember that the Cowan LRA Model’s monthly forecast numbers do not ‘sit still’, but change (evolve) each month reflecting the latest actual monthly sales numbers as published by the WSTS as the year plays out. This by-month evolution for both the sales and sales growth forecast results for each of the first six months of this year are illustrated in the following table below.


Source: Cowan LRA model, USA.

Source: Cowan LRA model, USA.

  1. Sanjeev
    August 9, 2012 at 6:41 am

    Dear Pradeep,

    Thanks for sharing Mike Cowan’s forecast data. This figure is slowly reaching to my earlier expectations.

    If you remember correct, I estimated the 2012 sales in range of $295-$305 billion in the beginning of the year itself.

    In fact, I have not revised my estimation so far. My model, which is based on the 3MMA, seasonality effect, and some other factors have made it more conservative in the beginning of the year itself.

    Q2’12, in fact, I was expecting $74 billion sales. But it reached close to $73.1 billion possibly due to higher inventory level and lower memory prices. I am expecting a negating Y-O-Y growth in Q3’12 will continue. We may not able to cross $77 billion mark in Q3.

    I am really bullish of a good come back in Q4’12 where many of the macro trends are positive. I am expecting smartphones and tablets will continue to drive the market with positive swing. New iPAD, iPhone, Samsung Tabs and smartphone will increase the semiconductor chips consumption. Also, low cost smartphone, tabs, home automation, connect car electronics, strong ultrabook market, etc. will be the new growth engine. I am expecting Windows 8 and Andriod 4.1 should act as catalysts and consumers will endorse experienced based economy.

    Even on sensors, optical device electronics, MEMS market, microprocessor market, high speed Ethernet market, etc., will see strong traction in Q4’12 and next year in general.

    We are expecting the world economy will grow by 3.9-4.0 percent in 2013, and that will make strong come back by semiconductor market. I am optimistic about 2013. We may see $325 billion plus market in 2013.

    Best regards,

    • Mike Cowan
      August 13, 2012 at 11:45 am

      Hi Sanjeev – Mike Cowan here. Thanks for your comments in response to my latest forecast numbers. Pradeep is kind enough to publish them and share them with his readers. Looks like you and I should compare notes on our respective models. If you would be willing to provide me your email address, I will send you an overview of the Cowan LRA Model for forecasting global semi sales. Send it to mikedcowan[at]

  2. August 9, 2012 at 8:43 am

    Sanjeev, what is India doing in all of this? Nothing?? 😉 Don’t we expect something from India as well? 😉

    • Sanjeev
      August 10, 2012 at 6:55 am

      Execellent point… I think this is a high time when we understand that only brain-storming and discussions in Five Star hotels is not going to solve the problem here. We are already a significant market from the ESDM perspective. We are consuming almost 10Bn semiconductors, and this figure is growing almost 25-30 percent.

      In 2010, alone we imported 20Bn plus electronics good. This figure is going to be horribly worse in 2020. We may import electronics goods, including consumer, medical, Industrial, automotive and communication, more than crude oil!

      If you recollect the Morris Chang statement a couple of years back about the China semiconductor market. As we know, China consumes nearly a third semiconductor devices and manufacture less than 10 percent. It formulated a specific policy to decrease the gap between TM and SAM. Now this is going really good. If China is consuming more mobiles or driving the telecom growth, then MediaTek, ZTE, HTC, HiSilicon, SMIC, etc., are supporting the domestic industry and also exporting the finished goods. Now, Qualcomm is no longer a leading mobile chip provider in China, MediaTek must have passed it, while I post this blog comment. This happened due to a right policy and frame work from government.

      So yes, a holistic effort has been seen from government, Fabless companies, FABs, EMS companies and even retailers too!

      I am really sorry to say, being a startup company in semiconductor industry in India, if you go for initial support from investors, including the government agencies and PE, you will get frustration, and nothing else. How can you scale-up yourself and start competing with the likes of Qualcomm and ZTE?

      Even services companies are struggling to maintain the momentum. I am sure the next CMR report on VLSI service industry may not be very exciting.

      What we need to do is to “Walk the Talk”… If you really want to capitalize on the 400Bn ESDM industry by 2020.

  3. Manoj Nagesh
    August 9, 2012 at 4:49 pm

    Dear Sanjeev,

    Thanks for your comments, I want to add one point. 2012 is the changing phase. We need to consider from 2012 to 2015, I am expecting the CAGR will be around 6-6.5% during this period. Asia-Pacific will play a major role.

    • August 9, 2012 at 4:56 pm

      Thanks Manoj. Apac has indeed been playing a major role in global semicon for some time now.

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