Global Semiconductor Market Seen to Hit Bottom in Q2, 2009

Anticipating that US economy would hit the bottom in the second quarter of this year, some institutional investors estimated global semiconductor market to bottom out then.

The investors point out Taiwan`s semiconductor industry is closely dependent on the US economy since the US and mainland China are Taiwan`s primary export destinations for semiconductor chips. They think the recent currency policy adopted by the Bush administration and measures that the upcoming Obama administration will take to boost the frail economy would begin to dig the US economy out of the hole in the second quarter this year, thus giving a boost to Taiwan`s semiconductor industry.

Organizations tracking semiconductor industry estimate the semiconductor industry as a whole to be only flat or decline moderately in 2008 and drop around 10 percent in 2009. They ascribe the 2009 slump mostly to low shipments of system products and slumping average selling prices of the products.

Institutional investors pointed out that factors affecting semiconductor market cycle include inventory backlog level, capital expenditure and supply-demand gap. In terms of inventory, the average level is estimated to drop to below 70 days in the fourth quarter of 2008, down from average 70.7 days in the third quarter and 74.6 days in the second quarter.

Meanwhile, capital expenditure to sales ratio of the semiconductor industry is estimated to slip to a new low of 17 percent throughout 2009, compared with 16 percent during the 1992-93 global oil crisis triggered by the Gulf War.

Source: CENS