The way the stock market had been treating semiconductor companies lately you might think the semiconductor sky is falling, and yet by all objective measures the industry is doing very well.
The SIA recently announced that Q2 - 2004 showed revenue growth of 40% over Q2 - 2003 surprising many observers with the strength of the growth. George Scalise of the SIA also predicted that Q2 utilization would in the mid ninety percent range up from 93% in Q1. Underlying product demand is good with wireless networking, mobile phones, consumer products and automotive all strong, and we expect PC demand to strengthen in the second half driven by new chip sets and features.
Some of the first Q3 results came in yesterday with TSMC reporting July sales up over 36% and UMC reporting July sales up over 60% versus July last year!
The Portsmouth Group Forecast for 2004 was for utilization rates in the low nineties for Q1, mid to high nineties for Q2 and high nineties for Q3 and Q4. The Q1 actual utilization was slightly stronger than we expected due to new capacity coming on-line slower than we forecast. Q2 appears to be in-line with our expectation (we won't have a complete Q2 analysis until late August). We still expect Q3 and Q4 to show high nineties utilization and rising ASPs due to supply constraints. We have been forecasting greater than 40% growth for 2004 over 2003. We still expect the second half to be strong. Record high oil prices do have us concerned that our forecast is now looking "aggressive", but all in all we still believe 2004 will end as a strong growth year. We also still expect 2005 to show reasonable growth with our preliminary forecast for 20% growth. We will have a more complete update at the end of August.
To access the full model and other technical analysis by The Portsmouth Group please contact Mr. Robert A. Walsh II by email at rob.walsh@gbvllc.com or by phone at (603) 766-1936.
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