Semiconductors: Wells, Longbow Cite Positive Data; Ultrabooks Big Swing Factor

A few of the Street’s semiconductor analysts today offered updates on the health of the industry based on recent data points.

Wells Fargo’s semiconductor analyst David Wong ticks off a list of positive recent semiconductor indicators:

• Micron Technology (MU) last Thursday beat analysts’ revenue estimates slightly, and actually, it was “significantly better” than Wong had been expecting.
• The North American semiconductor book-to-bill ratio was 1.01 in February, up from 0.96 in January, with bookings rising 12% from January, on a rolling three month basis, according to a report from industry trade group SEMI.
• An article in trade pub�DigiTimes‘s reported that Taiwanese chip designers are seeing a “jump in orders from China-based handset makers,” driving up revenue “sharply” for March and, probably, April. A similar article from DigiTimes said chip suppliers to notebook computers are seeing a lift from rising production of new “ultrabook” computers, “which are lifting the companies� book-to-bill ratios over 1.0.” Adds Wong, “According to sources, orders placed by notebook clients are more than 50% above the monthly average levels in January and February.”

Digging into the book-to-bill ratio, Wong remarks,

We think that the fact that semiconductor equipment orders have risen in each of the last five months suggests that chip companies are seeing signs that the inventory correction is ending. However, the relatively low book- to-bill ratio suggests to us the semiconductor industry is continuing to make efforts to minimize the risk of excess supply.

Longbow Research‘s JoAnne Feeney writes that data points coming from Asia point to PC component sales being flat this quarter to up 5%, which is better than what she had been expecting to be a decline of 10% to 15%.

That said, the year is shaping up as having more sales pushed into the latter half of the year because of the roll-out of the “ultrabook” laptops that Intel (INTC) is pushing OEMs to introduce:

Discussions point to supply chain disruptions arising from UB introductions as the main culprit for recent inventory dynamics and emphasize that we should expect a heavily back-end-loaded 2012.

Feeney reiterated a Buy rating on shares of Intel, and a $30 price target. She also reiterates a Buy on Advanced Micro Devices (AMD), and a $10 price target. Finally, she sees the advent of sales of Intel’s “Romley” server chip helping Volterra Semiconductor (VLTR), and reiterates a Buy rating on the stock and a $34 price target.

Fin