I am going to post a couple of Gottfried's charts showing the YoY percent change in chip sales along with worldwide semiconductor sales and SEMI Bookings data.
Shown are the SOX lows in 96, 98, 02, and 08. Also noted are the length of time in months the semi sales were negative on a YoY basis.
In 96, the price low occurred early in the down YoY cycle, in 96 the price low occurred at the tail end of the cycle, in 02 the price low occurred about 4 months after the end of the 16 month down cycle and now, in 08, we are into the 3rd month of the down cycle. This down cycle still has a long way to go. The semi sales dropped a big percentage in December with much further to go as 09 gets reported. How long this down cycle will last in unknown but it will be many months yet before it recovers to a positive level.
The question is - does this give us any insight as to price action this coming weeks, months, and year? If price were to make a significant recovery from this point, the price action would be much like what occurred in 96. If 11/21 was the "bottom", that coincides with the 2nd month of the YoY downturn - very early compared to the previous bottoms, except for 96.
Here we have a comparison of the SEMI Bookings cycles with the YoY semiconductor sales cycles. In 96 and 98 the price bottoms line up very close to the bottoms in SEMI bookings, and are well within the range of YoY down cycles. From Jan 01 to Jan 04, the Bookings bounced along a fairly broad bottom with only a sharp upward blip early in 02 which didn't last. In the meantime, the price bottomed in Oct 02, right in the middle of this Bookings low range and well after the recovery of the 16 month YoY semi down cycle.
Now in 08, going into 09, Bookings are at a very low point again, and most importantly, they are going to be low, and probably lower yet, for many months - how many we don't know, but it will be "many". Also, semi sales are dropping dramatically, and will continue to do so for many months. This will extend the YoY down cycle for many months into the future - how many? - we don't know, but it will be many.
There are not many data points from which to predict future price action, and those we have are not well correlated. However, as usual, it will be the future that will show us what comes to pass, but I think the key is how fast the economic recovery cycle will occur. Many people, including the "market" right now, think that it is right around the corner and it is time to "jump in". Many others think the recovery is not until 2010 or later and the economy could get worse before it gets better. As to who is right, we don't know. A lot will depend on what Congress comes up with in terms of hoped for recovery plans, and how they work once passed. |
