Semico's 12-Month Forecasting Index is 93% Accurate

Back in 1999, Semico began development of its proprietary forward-looking predictive model. The goal was to develop a mathematical model that would accurately predict directional changes in the semiconductor industry 9 to 12 months in advance. The result is Semico's IPI (Inflection Point Indicator) Report, a monthly subscription that includes our IPI Index along with industry articles written by each analyst.

The IPI Index has performed phenomenally well over the past 25 years, identifying the peaks and troughs for the last eight semiconductor industry cycles.

Recently a client asked us to update the correlation analysis for the IPI model. We performed this correlation starting with the IPI data in January 1986 and ending in March 2012 and correlated that with the worldwide three-month rolling average semiconductor sales starting in January 1987 through March 2013. The correlation over the past 25 years for the IPI index and the semiconductor industry sales twelve months in advance is 93.15%.

This means that 93.15% of the total variation in semiconductor sales can be described by the regression equation and 6.85% of the total variation in semiconductor sales remains unexplained. From a mathematical standpoint this is a remarkably accurate predictor.

In June 2011, Semico observed the IPI peak that indicated a fairly steady decline until February 2012. This told us that the second half of 2012 was going to be weak and well below seasonal expectations. Additionally we saw the IPI recover after February 2012 indicating that the bottom of the semiconductor cycle would be February 2013. We are pleased to report that indeed February 2013 does appear to be the bottom of the semiconductor cycle as predicted by the IPI in February 2012.

The index is now providing the following profile for 2013:

After an initial increase in the IPI during early 2012, we see that the IPI dipped slightly in the second quarter of 2012 which would indicate a lower than seasonally expected second quarter of 2013. The overall profile for the IPI segment for 2012 indicates a modestly positive growth for 2013.

The exciting news surrounding the IPI is that over the last several months we've seen a steady improvement in the IPI, indicating that the fourth quarter 2013 and early 2014 should be above seasonal expectations. This matches expectations that overall macroeconomics will continue to improve in 2014.

As for 2013, Semico is forecasting that the semiconductor industry will see revenues increase by approximately $17 billion as compared to 2012.

For More information, contact Rick Vogelei.
Phone: (480) 435 - 8564
Email: rickv@semico.com