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80,258 News Articles

Wall Street Beat: Chip sector helps buoy tech

IT stocks appear to be recovering

Technology stocks, battered by doubts about the global economy, appear to be recovering a bit this week as chip and electronics makers issued positive sales reports and a glimmer of good news about U.S. jobs appeared Thursday.

Economic worries have dragged down tech shares along with stock prices in other sectors since April 23, when the Nasdaq, which lists many IT companies, hit a 52-week high. Slow jobs growth in the U.S. coupled with worries that Mediterranean countries including Greece and Spain might default on debt have been the main causes of concern for investors over the past few months.

In the tech sector, however, industry insiders are looking to hardware and chip sales as major drivers for growth this year. On Tuesday, a Semiconductor Industry Association report indicated that chip sales are on track to hit US$290.5 billion this year, increasing by 28.4 percent compared to 2009.

The SIA said that global sales of semiconductors in May were $24.7 billion, a sequential increase of 4.5 percent from April, and an increase of 47.6 percent from May 2009.

"Chip sales have been buoyed by strength in sales of personal computers, cell phones, corporate information technology, industrial applications, and autos," SIA President George Scalise said in the report. "Unit sales of personal computers are now expected to grow by 20 percent this year and cell phone unit sales are predicted to be up 10 to 12 percent over 2009 levels."

Even though the report was upbeat, Scalise injected a note of caution about the global economy.

"Growing concerns about issues such as government debt, declining consumer confidence, and pressures on government spending do not appear to have affected worldwide semiconductor sales to date, but given the semiconductor industry's growing sensitivity to macroeconomic conditions, these issues bear watching in the second half of 2010," Scalise said.

A report issued Thursday by market research firm iSuppli, however, reinforced the optimism about the chip sector. The company said it has increased its forecast for semiconductor foundry revenue, due mainly to increasing demand for consumer electronics products. Revenue for semiconductor foundries will reach about $29.8 billion this year, an increase of 42.3 percent compared to 2009, iSupply said in the report.

Upbeat sales reports from manufacturers this week appeared to reinforce the cheerful predictions.

Unaudited results for the second quarter from mobile device manufacturer HTC showed that revenue for June was $23.5 billion Taiwanese dollars (US$730 million), up 66 percent from a year earlier.

For the second quarter of 2010, revenue reached NT$60.5 billion, a 58.5 percent jump from the same period in 2009, HTC said in its report. Second quarter net profit was NT$8.64 billion, up from NT$6.51 billion a year earlier. HTC is the world's largest maker of phones based on Microsoft's Windows Mobile, but also makes phones for other operating systems.

Meanwhile, Samsung Electronics, one of the world's largest electronics makers, on Wednesday said operating profit for the second quarter would likely hit a company record. Operating profit will be about 5 trillion Korean won (US$4 billion), on sales of 37 trillion won, Samsung said Wednesday. Samsung's previous record for operating profit record was set in the first three months of this year, with a 4.4 trillion won quarter.

Meanwhile, on the macroeconomic front, the U.S. government Thursday said initial jobless claims fell last week to their lowest levels since early May. Claims declined to 454,000, better than the 465,000 consensus forecast by analysts surveyed by Thomson Reuters.

The optimistic news and forecasts this week helped bolster exchanges. The tech-heavy Nasdaq closed Thursday at 2168, up by 11 for the day, the third straight day of increases for the exchange. Prior to the July 4 long weekend, the exchange, along with other major U.S. exchanges, had closed lower for seven days straight.

Next week, major IT bellwethers including Google, AMD and Intel will be reporting second-quarter financial results. A good quarter from these companies will go a long way to further bolstering investor confidence.


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