April sales the best in 15 years

At the Semico Summit in March my opening remarks covered the State-of-the-Industry and the unprecedented decline in the fourth quarter 2008. While many other market observers fell into the doom and gloom scenario predicting a 20-30% decline for 2009, Semico utilized it’s IPI, MAP Model and extensive industry experience to refute this conclusion.  Semico’s assertion  was that inventories were not grossly out of balance in Q3 2008 and the subsequent drop in sales was an over reaction resulting in below healthy inventory levels.

Some proclaimed that cell phones were going to experience dramatic drops due to the recession.  Our research and interviews showed just the opposite.  Cell phones are now considered a necessity.  It is the “land line” that is now viewed as an unnecessary extra! As far as the recession goes, consumers that we have interviewed who are looking to reduce their monthly expenditures are researching cell phone providers to pick a plan that reduces their monthly bill. In many cases this results in a change in carriers which requires a new phone! Any reduction in cell phone sales due to the rise in unemployment is overshadowed by consumers changing providers to save on monthly bills.  In December 2008, Semico forecasted cell phones to be down 10% in 2009 and we reaffirm this forecast.

The memory market continues to be plagued by excess capacity, however recently we began seeing improvements and stability even in this market segment.  

Our industry traditionally runs on a quarterly goal where the last month of the calendar quarter experience a large surge is monthly sales.  The resulting affect is that the first month of the following quarter usually experiences a significant drop in sales. Sales in April since 1996 have dropped between 17.2% - 34.8% when compared to March.  The 34.8% April drop occurred in 2001 when the industry experienced a 32% decline for the year.  The 17.2% drop occurred in 2004 when the year ended 28% up.  April 2009 has set an unprecedented record with sales declining a mere 7.6% when compared to March 2009.  As stated at the Semico Summit, our forecast for semiconductor revenues in 2009 is projected to be down between 12% and 13%. First quarter results were right on target with our expectations. April was surprisingly strong, compared to January, April is 21.3% higher.  This is also inline with our assumption that companies overreacted and now need to plan for the second and third quarters.