Global semicon sales to drop 1.7 percent in 2012?

October 10, 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.

According to the WSTS’s August (posted Oct. 9th, 2012 on its website) actual global semiconductor sales of $23.013 billion, the updated monthly forecast expectation for full year 2012’s total global semiconductor sales is expected to be $294.6 billion as calculated by the Cowan LRA forecasting model.

This latest update to the 2012 sales forecast estimate corresponds to a year-over-year sales growth expectation of minus 1.7 percent, which dropped from the previous month’s year-over-year sales growth forecast estimate of minus 0.5 percent.

It is also lower than the joint WSTS/SIA Spring 2012 sales growth forecast (published in June of this year) of plus 0.45 percent which corresponds to a global sales forecast estimate of $300.9 billion. Therefore, the model’s latest monthly sales forecast output (based on the just announced August 2012’s actual sales) continues to project even more negative sales growth for 2012 compared to 2011 and has remained negative for the third month in a row.

The model’s previous month’s forecast expectation for August’s actual sales was $24.8 billion as shown in the first table. This forecasted sales number generated last month was much higher than the just published actual August sales of $23.013 billion (larger by $1.76 billion or down 7.1 percent). This results in an M.I. (Momentum Indicator) of minus 7.1 implying that the sales growth trend will be ‘marginally’ down (that is, more negative) over the near term forecast horizon.

Incorporating August’s just published actual sales number into the Cowan LRA forecasting model also produces the latest updated sales and sales growth forecast expectations for the remaining two quarters of 2012 as well as for the four quarters of 2013.

Source: Cowan LRA model, USA.

Table 1: Source: Cowan LRA model, USA.

These results are summarized in the first table. Also provided in the table are the corresponding previous month’s sales and sales growth forecast numbers which were determined last month thereby providing sequential monthly forecast estimate comparisons.

As displayed in the Table 1, the latest projected full year 2012 global semi sales forecast estimate decreased to $294.6 billion from last month’s sales forecast expectation of $298.0 billion, a decrease of $3.5 billion or down sequentially by 1.2 percent. Correspondingly, the updated 2012 sales growth forecast expectation declined to minus 1.7 percent from last month’s sales growth forecast estimate of minus 0.5 percent, a decrease of 1.2 percentage points, still remaining in the negative territory; however, more negative than last month.

Also, next month’s September actual sales forecast estimate is projected to come in at $29.8 billion. Consequently, the resulting September’s actual sales forecast estimate equates to a September 3MMA sales expectation of $25.5 billion which is up from August’s 3MMA sales result of $24.3 billion. It should be emphasized that this forecasted September 3MMA sales number assumes no (or very minimal) sales revisions to either July or August’s actual sales numbers just published by the WSTS.

Additionally, year-to-date cumulative sales for 2012 (total yearly sales through August) came in at $189.5 billion compared to last year’s year-to-date cumulative sales number of $198.5 billion. This equates to a 2012 year-to-date (through August) sales growth result of minus 4.6 percent. This implies that global semiconductor sales for the second half of 2012 must exhibit  significant strength to reach last year’s sales number of $299.52 billion in order that the full year’s 2012 sales growth will 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 $151.7 billion which would correspond to a first half to second half sequential sales growth (1H => 2H) forecast estimate of 6.2 percent. Therefore, second half global semiconductor revenue would need to grow sequentially by at least 10 percent in order to assure a positive sales growth for 2012 relative to 2011.

For a view of the complete 2013 semiconductor sales and sales growth forecast outlook, the Cowan LRA forecasting model was extended in order to ‘capture’ the forecast sales numbers for the final two quarters of 2013. Thus, the second half of 2013 sales forecast estimate came in at $167.5 billion which represents a 10.5 percent increase over the (forecasted) 2H2012 sales of $151.7 billion.

Therefore, the full year 2013 sales forecast outlook becomes $316.2 billion which yields an expected 2013 year-on-year sales growth forecast estimate of 7.4 percent which, however, is down from last month’s sales growth forecast expectation of 7.7 percent

Table 2: Source: Cowan LRA model, USA.

Table 2: Source: Cowan LRA model, USA.

Quarterly, half year and full year forecast results for 2011, 2012, and 2013 are provided in the following table. As noted all forecast numbers are italicized. Also note that two additional lines have been added that provide the most recent WSTS/SIA (June 2012’s Spring 2012 Forecast Update) and Gartner (October 2012) forecast results for comparative purposes.

Remember that the Cowan LRA Model’s monthly forecast numbers do not ‘sit still’, but change (evolve) each month thereby reflecting the latest, up to date actual monthly sales numbers 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 seven months of this year are illustrated in the Table 3 and represent a unique feature of the Cowan LRA Model’s forecasting methodology: the updating of the forecast results each month immediately following the WSTS’s monthly release of its latest global semiconductor sales HBR Report.

Table 3: Source: Cowan LRA model, USA.

Table 3: Source: Cowan LRA model, USA.

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