The stock market has surged in 2019, and despite all the choppiness from the U.S.-China trade war and slowing global growth the top three semiconductor sector exchange-traded funds are up over 30% year to date as of the end of the third quarter.
24/7 Wall St. has been tracking the monthly sales data for semiconductor sales for some time as part of its industry focus for economic report trends in the coming weeks and months, and semiconductor supply and demand trends have been a fairly clear barometer for what’s happening in the world of technology and most durable goods sales. The reason is simple: chips have to be ordered ahead of time or the inventories have to be built up for big launches, and chips are now in just about everything you buy that requires batteries or a plug.
The Semiconductor Industry Association (SIA) has shown that global chip sales have now slid for eight consecutive months versus the prior year. The drops look steep on some metrics, but the SIA sales data showed that there have now been two consecutive month-to-month readings that were positive.
Worldwide semiconductor sales were $34.2 billion in August 2019. This latest figure represents a decrease of 15.9% from August of 2018 ($40.7 billion), but it also represents a sequential 2.5%gain from July of 2019 ($33.4 billion). While one month can never mark a trend, the data represents a three-month moving average.
Regionally, sales increased by 4.1% in the Americas on a month-to-month basis. That was followed by 3.8% for Asia Pacific/All Other, 1.8% growth for China, and 1.1% growth in Japan. Semiconductor sales decreased in Europe by 0.8% on the month-to-month readings.
The year-over-year numbers showed that semiconductor sales were down across all regional markets. The Americas led with a 28.8% drop from a year ago, followed by a 15.7% drop in China, an 11.5% drop in Japan, a 9.2% drop elsewhere in Asia and an 8.6% drop in Europe.
Recent earnings and guidance from Micron punished the company’s shares with a 14% combined drop after last week and including this week’s post-earnings reaction. Of the largest chip leaders, Micron’s drop has been the worst of the leaders we track but Wall Street analysts have defended its valuation here, with small drops from shares in Analog Devices, Applied Materials, AMD, Broadcom, Qualcomm and Xilinx. Small gains have been seen in the past week in Intel, KLA, NXP and Texas Instruments, and nine of the top 12 semiconductor names we track in the sector have gains of 30% to over 70% year to date.
John Neuffer, SIA president and CEO, said of the August semiconductor chip sector sales:
While worldwide semiconductor sales remain well behind the totals reached in 2018, month-to-month sales increased in two consecutive months for the first time in nearly a year. Sales into the Americas market were mixed, decreasing significantly year-to-year but increasing more than any other region on a month-to-month basis.
As far as making any big bold predictions for how global demand growth will be in future months, most people would need to know where the U.S./China trade talks end up.