2012 Semi Sales Headed for Decline

Employing the September actual global semi sales of $27.8 billion reported, the updated monthly forecast expectation for 2012 total global semi sales is expected to be $291.76 billion as calculated by the Cowan LRA forecasting model. This latest derived update to the 2012 sales forecast estimate corresponds to a year-over-year sales growth expectation of minus 2.6 percent, down from the previous month's year-over-year sales growth forecast estimate of minus 1.7 percent.

The latest forecast is also much lower than the joint WSTS/SIA Spring 2012 sales growth market forecast (published in June) of plus 0.45 percent, which corresponds to a global sales forecast estimate of $300.9 billion. Therefore, the Cowan model's latest monthly sales forecast output (based on the just announced September 2012's actual sales) continues to project more negative sales growth for 2012 relative to 2011 and has exhibited a downward sales and sales growth trend for the fifth consecutive month.

The model's previous month's forecast expectation for September's actual sales was $29.8 billion. This sales number generated last month was much higher than the just-published actual September sales of $27.8 billion. This results in a Momentum Indicator (MI) of minus 6.8, implying that the sales growth trend will be marginally down (that is, more negative) over the near-term forecast horizon.

Inputting September's just-published actual sales number into the Cowan LRA forecasting model also produces the latest updated sales and growth forecast expectations for the final quarter of 2012 as well as for the four quarters of 2013. These results are summarized in the first table included here. Also provided in the table are the corresponding previous month's sales and sales growth forecast numbers, thereby providing back-to-back monthly forecast estimate comparisons.

As displayed in the table above, the latest projected full-year 2012 global semi sales forecast estimate fell to $291.9 billion from last month's sales forecast expectation of $294.6 billion -- a decrease of $2.7 billion or down sequentially by 0.9 percent. Correspondingly, the updated 2012 sales growth forecast expectation declined to minus 2.6 percent from last month's sales growth forecast estimate of minus 1.7 percent, a decrease of 0.9 percentage points -- that is, falling into more negative territory compared to last month's forecast estimate.

Also, October sales are projected to be $23.96 billion. Therefore, October's sales forecast equates to a 3 months moving average (3MMA) sales expectation of $24.9 billion, which is up slightly from September's 3MMA sales result of $24.8 billion. It should be emphasized that this forecasted October 3MMA sales result assumes no (or very minimal) sales revisions to either the August or September actual sales numbers just published by the WSTS.

Additionally, according to the WSTS, year-to-date cumulative sales (total yearly sales through September) came in at $217.2 billion compared to last year's year-to-date cumulative sales number of $228 billion. This equates to a 2012 year-to-date (through September) sales growth rate of minus 4.7 percent. This implies that global semiconductor sales for the final fourth quarter of 2012 will have to exhibit significant strength to reach last year's overall sales number of $299.52 billion in order that the full year's 2012 sales might break even with last year's sales -- let alone show a mildly positive sales growth for the year.

To be more precise, the latest Cowan LRA model's sales forecast expectation for the fourth quarter of 2012 is predicted to come in at $74.5 billion. When coupled with the actual third quarter sales of $74.4 billion it corresponds to a 2012 second half sequential sales growth forecast estimate of 4.2 percent. Therefore, fourth quarter global semiconductor revenue would need to come in at $82.4 billion or more in order to assure a positive sales growth for 2012 relative to 2011 -- a highly unlikely scenario compared to historical experience.

Remember that the Cowan LRA Model's monthly forecast numbers do not "sit still" but will change each month, thereby reflecting the latest, most up-to-date actual monthly sales numbers published by the WSTS as the year plays out.