October global chip sales up 5.3% on-month

KUALA LUMPUR: Global sales of semiconductors rose to US$21.7 billion (RM73.3 billion) in October, up 5.3% from September when sales were US$20.6 billion, the Semiconductor Industry Association (SIA) said on Monday.

The US-based association said sales were, however, 3.5% below that of October 2008’s US$22.5 billion. Sales for the January to October period totalled US$180 billion, down 16.6% from US$215.8 billion a year earlier. All monthly sales numbers represent a three-month moving average of global semiconductor sales.

"October is historically a strong month for the semiconductor industry as electronic equipment manufacturers ramp up production for the holiday season," said its president George Scalise.

"Inventory management throughout the supply chain has been very tight, and this may extend the fourth-quarter build season by a few weeks," he said.

Scalise said as semiconductor sales were increasingly driven by the performance of the overall global economy and the chips sales reflected the improved economic conditions in the world markets. Sales increased sequentially in all geographic regions, he said.

Meanwhile, RHB Research Institute said although the October chip sales growth was the eighth consecutive gain on a month-on-month (m-o-m) basis after five months of decline from October 2008. However, it said the m-o-m gain appeared weaker than the September m-o-m gain of 8.2%.

It said this was not unexpected as wafer foundries were cutting back on production in anticipation of weaker chips demand after the festive sales.

On a year-on-year (y-o-y) basis, the contraction continues to narrow with October 2009 global chip sales falling 3.5% y-o-y compared with a contraction of 30.2% in February 2009 and a decline of 10.1% in September 2009 (based on three-month moving average basis).

"We expect chip sales to register y-o-y growth ahead given the low base factor beginning November 2008 noting that November 2008 chip sales were down 9.9% y-o-y," RHB Research said.

It said that equipment orders were showing some signs of weakness, falling 0.3% m-o-m to US$756.2 million compared to a growth of 23.4% in the previous month after registering six months of m-o-m gains since March 2009. It said this suggested chip producers were holding back their capital expenditure spending until better order visibility emerged next year.

"However, we expect equipment orders ahead to register y-o-y growth as equipment orders began to decline from November 2008 which recorded a drop of 30.7% in y-o-y basis," it said.

The research house said major foundries posted stronger-than-expected third-quarter sales, but expected a flattish fourth quarter as key drivers for 3Q growth were mainly the stimulus package in China and restocking activity for certain chips (especially consumer IC, telecommunications and graphic chips).

It said players were expecting weaker sales ahead, after resurgent second and third quarters