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US semiconductor sales data point to 'signs of life', say analysts
[NEW YORK] The latest data on semiconductor sales is pointing to stabilisation in the industry, suggesting that months of weakness and tepid demand could be nearing an end, analysts said on Monday.
According to the Semiconductor Industry Association, total monthly sales came in at US$33 billion in May, up 7.1 per cent from April. While the May data represented a year over year (y-o-y) decline of 14.5 per cent, it also represented a moderation from the 17.7 per cent drop in April.
"While the industry is still working through a cycle, the y-o-y declines appear to be decelerating," wrote Mitch Steves, an analyst at RBC Capital Markets. "Given that forecasts were cut during a period where sentiment was heavily negative, we think there is upside bias to the numbers expected for 2019/2020."
The data comes at a time when analysts have been concerned about the prospects for the industry in the second half of the year, especially since the Philadelphia Semiconductor Index is within 7 per cent of record levels. A number of companies, notably Broadcom Inc and Micron Technology Inc, have issued cautious outlooks in recent weeks.
Morgan Stanley wrote that the data pointed to "some signs of life" after "an exceptionally weak April", and noted that sales - along with the product categories of micro, logic and memory chips - came in ahead of its expectations. However, analyst Joseph Moore maintained his cautious view on the sector, seeing "very challenging industry conditions" despite the data.
The data was also above Citi's estimate, according to analyst Christopher Danely, who raised his full-year semiconductor sales forecast to US$413.3 billion from US$408.2 billion. The outlook represents a full-year decline of 12 per cent, compared with a previous view of down 13 per cent.
The Philadelphia Semiconductor Index rose as much as 5 per cent on Monday, though it last traded up 2 per cent on the day. The day's rally came as the US and China declared a truce in their trade war over the weekend; President Donald Trump also said he would delay trade restrictions against Huawei Technologies Co, a major customer to a number of chipmakers.