Analysts say the semiconductor industry has bottomed out

According to an analyst on Wall Street, the current semiconductor industry's recession has bottomed out and brings to the wafer industry a “phase one” where the economy starts to improve.

JP Morgan analyst Christopher Danely said in a recent survey report that almost all of the semiconductor industry's "super earnings report week" can see evidence that semiconductors and stocks are at the bottom, including several chip companies. The channel dealers pointed out that their orders began to rebound.

"We believe that we are now in the first phase of the recovery of the semiconductor economy - orders are stabilizing," Danely wrote.

Danely continues to emphasize that JP Morgan is optimistic about the upturn in the semiconductor industry's economy and recommends that investors continue to purchase wafer stocks. He quoted more and more signs showing that the semiconductor recession bottomed out and that Wall Street's revised chip companies had more possibilities to predict the figures in the first half of 2012.

Danely said that in the past few weeks, several chip companies and access vendors, including Fairchild Semiconductor, Texas Instruments, and Arrow Electronics, have indicated that their order rates are falling to the bottom. However, Arrow Electronics expects that semiconductor manufacturers can expect to see a turnaround in order rates from the first quarter of 2012 and further increase in the second quarter of 2012.

According to the semiconductor industry association (SIA)’s wafer sales and the fourth-quarter financials of chip companies, the semiconductor industry will show a flat-to-sliding trend in the second half of 2011, far below the 15% growth expected for the PC industry. The rate is also lower than the 8% growth rate forecast for mobile phones. Danely said that according to JP Morgan's analysis, this is a solid proof that semiconductor companies shipped below terminal demand. Therefore, after inventory replenishment stabilizes terminal demand, it will bring order growth for the first quarter of 2012.

When the semiconductor companies stop reducing their financials, the “second stage” of the recovery will start to appear at the end of the fourth quarter of this year. Danely expects that "as the order continues to stabilize, the inventory gradually goes away. We expect this to happen between now and the end of this year."

The “third phase” of the recovery of the economy has appeared at a time when market demand is stable and stocks must be covered, making the orders of several wafer companies start to grow steadily. Danely predicts that this phase is expected to appear in the first quarter of 2012.

At about the end of the first quarter of 2012, the industry will enter the “fourth phase” of rising economy. By then, semiconductor companies will increase their fiscal measurement numbers based on continuous increase in order rates. Danely said, “With semiconductor companies improving It is expected that the industry will generally increase market forecasts at the end of the first quarter of 2012, he said.

According to Danely, the semiconductor industry also experienced this four-phase recovery after the last recession.

However, Jim Feldhan, president of Semico Research, predicted last month that the semiconductor industry's recession will bottom out in February 2012 and that it will not be able to recover from the bottom until the middle of next year.