SAN FRANCISCO¡ªIn an otherwise gloomy consumer overview, worldwide sales of semiconductors¡ªthe second-largest U.S. export¡ªwere up by four percent compared to the first nine months of 2007 when sales were $189 billion. According to the Semiconductor Industry Association (SIA), bit demand for some memory products grew by more than 100 percent year-on-year, however, significant price attrition continued to impact revenues.Sales of flash memory chips declined by 37.5 percent year-on-year, while sales of DRAMs (Dynamic random access memory chips) declined by 11.1 percent from September 2007.
¡°The rate of semiconductor sales growth slowed in September as the industry began to feel the effects of the turmoil in world financial markets,¡± said SIA president George Scalise. ¡°We face a near-term period of uncertainty with a steep decline in consumer confidence and caution in the enterprise segment.¡± Scalise noted that the Conference Board last week reported a drop of more than 20 points in its Consumer Confidence Index, which fell from 61.4 in September to a new low of 38. ¡°The picture is somewhat brighter in emerging markets,¡± Scalise added. ¡°Sales of personal computers and cell phones¡ªthe two largest drivers of semiconductor sales¡ªremain strong in these emerging markets, driven by growing consumer populations and rising income levels coupled with more affordable pricing. Economic growth in major developing countries is still high in mid- to high-single digits, albeit below recent peaks.¡±
Analysts project PC unit sales will grow by at least 11.5 percent this year. Developing countries now account for nearly half of all unit sales of PCs. JPMorgan projects 8.7 percent year-on-year unit growth in cell phone sales to 1.35 billion in 2008. Developing countries are expected to account for nearly 70 percent of unit sales of cell phones in 2008.
Max Isaacman, a San Francisco-based financial analyst, told LM that Standard and Poor¡¯s estimates that the tech sector¡ªwhich includes semiconductor companies¡ªwill have good earnings results in 2009.
¡°Earnings in the sector are estimated to increase 22 percent in 2009 from 2008. If the sector earns that it will sell for 11 times earnings, which is a low multiple. The other stocks in that sector handle products developed by internet software and service companies, semiconductor equipment and products, and related services and products.¡±
For Scalise, however, it all depends on restoring consumer confidence:
¡°Year-to-date chip sales growth of 4 percent trails the SIA mid-year forecast of 4.5 percent growth.¡±
