January SIA: Seasonal Softness (from CSFB)
• Worldwide semiconductor revenue fell by 2.4% on a 3-month moving average basis (3MMA) and seasonally decreased 20.1% on a single-month basis in January (below the 25-year historical average of –16.7%). Unit growth (3MMA) was a negative 2.4%, following the 3.5% decrease in December. ASPs flattened (0.0% M/M) on a 3MMA basis after posting positive growth for the prior six months.
• Analog: Numbers were below seasonal on a M/M basis across the board except for the Standard Linear ASPs, which were 10.3% above seasonal on a M/M basis driven by all segments except Data Converters. For total analog, units, revenue and ASPs were down 20.7%, 22.5% and 2.3% on absolute month-over-month basis.
• DRAM: DRAM revenues decreased 2% in January, as ASP increases (up 2.1% M/M) were unable to offset unit declines (down 3.7% M/M) on a 3MMA basis. We expect February SIA data on a 3MMA basis to reflect a decline in ASPs as contract prices lag spot market trends, where the 256Mb DDR DRAM declined 31% during that time. SIA data shows that DRAM ASPs on a single-month basis declined 3.5% M/M (down 2.4% in Dec, up 12.6% in Nov).
• MPU: MPU revenues declined 2.9% in January, on a 3MMA basis, driven largely by a 6.3% unit decline unable to offset a 3.6% ASP increase. This revenue decline compares to historic seasonality of a 2.5% decline in January over the past 5 years, on a 3MMA basis. Our channel checks from many participants in the PC supply chain indicate that January was a fairly strong bookings month.
• Wireless: Wireless DSP units were up slightly M/M while wireless analog units were down 30%. The strength in wireless DSPs may be a result of strong Lunar New Year builds, though recent data points suggest the build has continued through February. With that said, the significant M/M price erosion remains a concern. Wireless DSP units in January were up 0.9%, while revenues and ASPs were down 22% and 23% on an absolute M/M basis.
• We remain market-weight on the semiconductor sector and continue to favor high-end analog and unit driven diversified companies with broad end-market and broad product exposure. Our stock picks are: Large cap: STM, LLTC, MXIM; Mid cap: ISIL and MRVL; Small cap: ICST. Disclosure for stock picks: STM ($18.61, Outperform, TP $21.60), LLTC ($30.67, Outperform, TP $26), MXIM ($34.54, Outperform, TP $33), ISIL ($15.65, Neutral, TP $18.80), MRVL ($20.60, Outperform, TP $24), ICST ($23.86, Neutral, TP $25). |
