Wall Street Beat: Hardware, chip sales shine

Rising PC sales fuel growth in semiconductors

Upbeat sales reports and forecasts continue to pour in for the PC and chip market, offering yet more evidence that economic recovery has already spurred a worldwide resurgence in spending on hardware.

The Semiconductor Industry Association (SIA) trade group on Thursday issued a multiyear forecast that projects worldwide chip sales to increase by 28.4 percent to $US290.5 billion in 2010.

The SIA report suggests that spending on semiconductors will level off a bit toward the end of the year, and forecasts 6.3 percent growth to $US308.7 billion for chip sales next year, followed by 2.9 percent growth to $US317.8 billion in 2012.

"Healthy demand in all major product sectors and in all geographic markets drove sales of semiconductors to record levels in the first four months of 2010," said SIA President George Scalise in the semiconductor sector report.

Certain developing economies, however, are expected to achieve especially strong levels this year.

"Economic forecasts project global economic growth rates of 4.6 percent in 2010 and 4.4 percent for 2011, with the fastest growth expected to be in emerging economies," Scalise said. "These emerging markets -- especially China and India -- are creating demand for Information Technology products, which in turn fuels demand for semiconductors."

Earlier in the week, Jon Peddie Research issued a report saying that demand for workstations has grown, as the market posted a healthy gain for the first quarter of 2010. The industry shipped 725,000 workstations worldwide in the first quarter of the year, a year-over-year increase of 25.7 percent, according to the Peddie report.

"While a welcome number, the 25.7 percent gain over the same quarter a year ago should be taken with a grain of salt, as it's more a reflection on how bad the Q1'09 market performed than how good Q1'10 turned out," according to the report. The sequential gain from the fourth quarter of 2009 to the first quarter this year, while only 1.1 percent, is instead a better indicator of progress, according to Peddie.

Generally, even during years of modest growth, first-quarter workstation sales lag fourth-quarter figures, so the modest quarter-to-quarter growth is actually "a bullish sign," the report said.

This week's market surveys follow an iSuppli report last week that said that, fueled by strong Asian sales, the PC market worldwide expanded 22.7 percent in the first quarter, hitting 81.5 million shipments -- the highest year-over-year quarterly growth the market research company has ever recorded.

Taiwan Semiconductor Manufacturing (TSMC) on Thursday announced May sales numbers that reinforce the rosy figures from the market research firms. TSMC, the biggest contract chip manufacturer in the world, said that on a consolidated basis, net sales for May 2010 were approximately NT$34.82 billion (US$1.07 billion), an increase of 3 percent over April 2010 and a whopping 37.9 percent increase over May 2009.

Revenue for January through May 2010 totaled NT$160.82 billion, an 84.4 percent jump compared to the same period a year earlier, TSMC said.

The chip and hardware sector figures come out in the wake of upbeat first-quarter sales numbers from bellwethers such as IBM, Intel, Google and Apple. Nevertheless, IT stocks have been beaten down over the past few months as economic concerns linger. The biggest concern recently has been that skyrocketing debt in Mediterranean countries, especially Greece and Spain, will hold back growth in the European Union, putting a damper on global recovery.

So when stocks ticked upward Thursday, leading all major U.S. exchanges to close up for the day, most observers attributed the upswing not to good news from tech, but to U.S. job figures, Chinese trade numbers, and reports that the German Constitutional Court had rejected a move to prevent the country from making guarantees to help strengthen the euro.

The U.S. Labor Department Thursday said new claims for unemployment fell last week by 3,000 to a seasonally adjusted 456,000.

Meanwhile, markets around the world jumped on the news that last month China exports rose 48.5 percent and imports increased 48.3 percent. The report allayed fears that the European debt crisis would dampen world trade.

The tech-heavy Nasdaq exchange closed at 2218, up by 59 points or 2.77 percent. That was on parity with the broader Dow index, which closed at 10172, up by 273 or 2.76 percent.

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Marc Ferranti

IDG News Service
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