This time around it's going to be different. Back in 2001 when the semiconductor industry struggled through a recession, sales dove by 32.5% and took nearly three years to return to 2000 levels.
The main difference between now and then is that unprecedented growth between 1999-2000 caused extreme overproduction and created standing inventory. As a result, it took a long time for prices to rebound.
The crisis leading up to today has been caused primarily by temporary macroeconomic issues that have strangled consumer spending on devices that use integrated circuits (ICs). Therefore, semiconductor stocks should recuperate at a much faster rate.
Databean, a market research firm that focuses on the semiconductor and electronics industries, says recovery will come to the industry in 2010 when spending increases 35% and another 29% in 2012 when it will reach $53.3 billion.
The firm also predicted that by 2011, total IC sales will surpass the peak seen during 2007, with $269.1 billion in revenue.
"We believe that the market reacted swiftly to the financial meltdown and that with little inventory in the channel now, production will begin to flow again and not remain stagnant as it did in 2002," Databeans reports. "This improved situation isn't likely to happen all at once, but certain indicators show that recovery may be sooner than later."
Enough said. I'm convinced, but I'm not as high on the big boys as I am small-caps for good reason.
I know I've brought up history before, but over the past 79 years, small-cap stocks have outperformed large-cap stocks by 165%. Because they perform best following a bear market, now's the time to consider getting back on the horse and saddling up for profits.
I'm of the opinion that many of the large-caps will be weighed down by institutional investors slowly taking money off the table to invest in faster-growing small companies with greater potential.
Put these stocks on your watch list: STEC In! c. (NASD AQ: STEC), Vishay International (NASDAQ: VSH), Tundra Semiconductors (TUN.TO) and Integrated Device Technology (NASDAQ: IDTI).
Semiconductor STEC blew away estimates on Monday, reporting non-GAAP EPS of $.17 a share for the first quarter of 2009 on revenues of $63.5 million. Estimates called for $59 million in revs and earnings of $.10 a share. More importantly, STEC issued extremely strong guidance for Q2: The company now expects revenue to range from $68 million to $70 million with diluted non-GAAP earnings of $.20-$.22 cents a share. Analysts had been expecting $59 million in revs and $.10 a share for Q2.
Shares rose 31% on Tuesday.
No news was good news for semiconductor manufacturer Vishay. First quarter 2009 earnings remained unchanged, with a loss of $29.1 million, or 16 cents a share. The first quarter last year Vishay lost $30.7 million, or 16 cents a share. Shares rose 3% that day despite the so-so news.
Vishay President and CEO Gerald Paul thinks its business has bottomed out. He said Vishay's semiconductor sales started to recover in the first quarter and have picked up even more this month, but sales of its passive electronic components, which are used by auto makers and other manufacturers, may still decline slightly.
Argus recently upgraded VSH to a Buy.
Tundra was recently acquired by Integrated Device Technology (NASDAQ: IDTI) for about $99.34 million, beating out an offer by Gennum Corp (GND.TO). Shares of TUN rose nearly 3% on the news.
The Ottawa-based leader in System Interconnect announced its new Serial RapidIO(R) System Modeling Tool on Tuesday. The new System Modeling Tool allows wireless, military, imaging, video infrastructure and storage OEMs to explore the full performance potential and features of RapidIO interconnect to enhance system level performance, optimize architecture and reduce power consumption.
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