Semiconductor Sector – Watch The Early Bird In 2019

I started my work life many moons ago as a participant with the Semi sector [circa 1983-1993], painfully learning first hand how violent the cyclical turns can be. Dialing ahead a couple decades, in January of 2013 NFTRH began a narrative that saw the then up-turning Semi Equipment bookings (this data is unfortunately no longer published) lead the sector, general manufacturing and eventually the whole raft of components that make up the economy into a cyclical up-turn.

The prime Semi Equipment names we follow are Applied Materials (AMAT) and Lam Research (LRCX). Well over a year ago we used their failing leadership to the broad Semi sector as a leading indicator on the economy, and things finally came to a head in October, 2018. We made note of how industry advocates have been lobbying hard for the Trump Administration to re-think its trade tariffs as relates to Semiconductors.

My question has been over the last year and still is… ‘is the Semi Equipment downturn a real cycle or just a cyclical interruption?’ Reference…

From my contact, per the NFTRH Update linked above…

Hi Gary,

We see business off about 25-30% from the high over the past year. I suspect it will stay at this level and as of right now it looks like it will not recover until Q1 and maybe not until Q2 next year. 2019 is still expected to be just as robust as it was and depending on the world economy may even be up 5-10%.

In short, while we have been managing an industry slowdown, exacerbated by the US/China trade war, the question as illustrated by my contact’s feedback and by this graph taken from the January 2018 post linked above is whether this has just been a cyclical crimp in the rope or a real downturn.

Here is the updated version of this chart, from SEMI per this industry review…

It’s Chilly!

Over a one-year period the cycle has continued to consolidate but has not yet gone negative.

From the article…

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