Chips: Inventory Restocking–Or A Real Bottom?

Chip stocks are suddenly on a ferocious tear: the SMH, the semiconductor HOLDRs, have rallied 16 percent in six days. There’s a spreading view that semiconductor demand may have hit bottom.

But not everyone is convinced.

Auriga USA analyst Daniel Berenbaum this morning asserted in a research note that “the recent rush to call the bottom in semiconductor stocks is based largely on supply-side data that effectively ignores continued deterioration in demand.” Berenbaum thinks the SOX, the widely tracked semiconductor stock index, will eventually return to its November lows in the 170 range. The index closed today at 220.91.

Even Berenbaum concedes that data points from the supply chain are “incrementally positive,” with business in the semiconductor manufacturing chain improving sequentially in both February and March. But he contends that “this increased activity is being driven almost entirely by inventory restocking from low absolute levels, and not a pick-up in demand. ” He notes that there have been shortages in a few categories, in particular power management chips and LCD drivers, but adds that “even here, visibility seems to extend a few weeks at most.” Berenbaum notes that utilization at wafer fabs has picked up, but that one-third of foundry capacity remains idled.

Read the rest of this post

Must-Reads from other Websites

Panos Mourdoukoutas

Why Apple Should Buy China’s Xiaomi

Paul Graham

What I Didn’t Say

Benjamin Bratton

We Need to Talk About TED

Mat Honan

I, Glasshole: My Year With Google Glass

Chris Ware

All Together Now

Corey S. Powell and Laurie Gwen Shapiro

The Sculpture on the Moon

About Voices

Along with original content and posts from across the Dow Jones network, this section of AllThingsD includes Must-Reads From Other Websites — pieces we’ve read, discussions we’ve followed, stuff we like. Six posts from external sites are included here each weekday, but we only run the headlines. We link to the original sites for the rest. These posts are explicitly labeled, so it’s clear that the content comes from other websites, and for clarity’s sake, all outside posts run against a pink background.

We also solicit original full-length posts and accept some unsolicited submissions.

Read more »