Softness in Semis Does Not Signal End of Boom, Firm Says

Online staff -- Electronic News, 8/17/2004

Downgrading of semiconductor stocks, decreasing book-to-bill ratio, and lowered revenue expectations have perpetuated the belief that the current softening in the semiconductor market will lead to the end of the boom, but this is not the case, according to Advanced Forecasting.

Rather, the market research firm said the softness is most likely temporary and could be the correction needed to prevent extreme over-heating, which would trigger another recession.

“The recent softness has come as a surprise to the majority of the semiconductor market, but not to those that follow our [forecasts]. Our quantitative forecasts alerted clients in Q1 that a slowdown would happen in the third quarter,” said Rosa Luis, director of marketing and sales for Advanced Forecasting, in a statement.

The firm also maintains its forecast that semiconductor equipment sales will stay strong through the rest of the year, growing 65 percent to 70 percent over last year, published in Q1.

In contrast, Advanced Forecasting pointed out that recently other industry forecasters have increased 2004 growth rate predictions for the semiconductor equipment market either close to or exceeding the 60 percent mark, including SEMI’s consensus forecast. These same forecasts were in the range of 35 percent to 48 percent in January. This is interesting, given that most equipment bookings for the year have been recorded, increasing the chance of an accurate forecast.

“The trick is to predict the growth rate a year in advance, not at end of the year when bookings are already known. The only tools capable of accurately predicting changes in direction for a market are those that use purely quantitative models, and hard data as input, independent of human opinion,” Luis added.