Strong Market Conditions Driving Semiconductor Sales Up

Yesterday afternoon Intel reported first-quarter revenues of $10.3 billion with operating income of 3.4 billion and net income of 2.4 billion. Compared to first quarter 2009 revenues were up 44% operating income of 433% net income of 280% exemplifies the strength and intensity of the semiconductor recovery.

Gross margins have recovered to 64% indicating that companies efficiency and the strength of the overall electronics markets. Intel's strong 1Q 2010 performance does not come as a surprise to Semico.  The IPI results from one year ago indicated that the industry would see this kind of growth in 1Q 2010.  Intel is the largest chip vendor and a bell whether company. 

The Semico inflection point indicator, published in the Semico IPI monthly report has forecasted a strong 2010. Although final industry statistics for March have not been released, we fully expect that first-quarter 2010 will be between 45 and 50% above first quarter 2009. Our Outlook for second third and fourth quarter looks very realistic at just over 25%.

Inventories still remain tight and there is certainly some momentum in the order rates that indicate OEMs are trying to build some buffer inventory. This inventory build could quite easily drive revenue growth much closer to 30%. So far we have seen the IPI continue to remain at record high levels and have not seen any indications pointing to the beginning of a downturn for the next 12 months.

Driven by end market forecasts, economic scenarios, upgrade cycles and adoption trends our forecast show that there is the fundamental semiconductor demand at least through the end of 2011 which will produce strong semiconductor industry revenue growth.