December 5, 2011 – Global semiconductor sales totaled $25.7B in October, essentially flat from the prior month, as growth Japan (for a fourth straight month) and the Americas was offset by declines in Europe and most importantly the Asia-Pacific which accounts for more than half of global chip sales. Year-over-year, chip sales in October were quite a bit down across the board: declines of more than -7% in Japan and Europe and -2.5% in the Americas, though a 1.7% increase in A-P kept the total Y/Y decline to only -1.8%.
Year-to-date, chip shipments are in the black: 4.6% in the Americas, 3.4% in A-P, and 1.2% in Europe. And the three-month moving average (August through October) showed decent gains of 3.6% overall, a number equaled in the A-P region while Japan continues to surge (+12%). Chip sales had picked up 2.7% in September in what the SIA called "an optimistic close" to 3Q11.
General consensus seems to be there’s nothing too surprising in chip sales updates, given the softness being projected by many industry firms for 4Q11, and reading the tea leaves shows mixed signals. Sales and units were both slightly below seasonal in October, -20% (vs. -18%) and -14% (vs. -12%) respectively. Year-year, NAND and MPU were up in October; everything else (logic, MCU, DRAM, NOR, analog, DSP, and discrete) was down.
Credit Suisse’s John Pitzer, referring to his company’s recent Tech Conference, noted that chip firms believe the environment is "stabilizing" taking everything into account (backlog, bookings, inventory, and lead times), but nonetheless they’re still hesitant to call 4Q11 the definitive bottom of the cycle. In fact, if November and December follow seasonal trends (+3% and +8% respectively), he says, then 4Q overall will close at -5% below 3Q11 — vs. the -3% dropoff Wall Street analysts are expecting, and vs. the quarter’s normal 1.7% seasonal pickup.
Deutsche Bank’s Ross Seymore notes that the problem is weak demand prolonging semiconductor firms’ efforts to thin out their backlogs. Inventories are actually stabilizing from a dollars standpoint (after seven quarters of sequential increases), he says, but they’re still elevated when looking at days-of-inventory (81 DOI) and the channel because of weak demand. Sales-to-customer will likely drop in 4Q11 after rising in 3Q11, but probably still be above Y/Y levels, "somewhat surprisingly implying a more minimal inventory burn this year," he writes in a research report. Thinner channel inventory burnoff in 2H11 "highlights that soft demand is as big an issue as elevated supply and that the inventory reduction period may prove more prolonged than many hope," he says.
And those seasonal year-ending numbers would bring total 2011 chip sales to only 1.0% — right about where everyone now projects. (IHS iSuppli now targets 1.9% in 2011 chip sales growth, up from 1.2% expectations.)