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Citigroup analyst Glen Yeung is out with a bearish call on chip stocks.Here’s a quick roundup of concerns:
- Macro-economy issues. Everybody knows about this, and chips are not immune.
- PC sales are ugly. This isn’t a particularly new story. Notebook shipments may only grow 0-5% in 2011.
- The growing concerns are in handsets. Citi’s Taiwan analysts are worried about collapsing sales at Research in Motion and Nokia, but also “lack of strength in the HTC/Apple supply chain.” As such, they’ve reduced Q3 estimates for Taiwan Semi and UMC. Channel checks are flattish sequentially between Q1/Q2/Q3.
- Generally speaking, Second half semi estimates are likely to fall from current consensus of 12% industry revenue growth. Of 60 companies followed, only 17 are likely to post above normal seasonal growth for Q3.
Along the same lines, you should pay attention to recent commentary from famed tech newsletter writer Fred Hickey who told Barron’s (via The Reformed Broker) that the rise of tablets was an “unmitigated disaster” for chip stocks. Shares of NVidia — which have plunged some 14% in two months — are the proverbial “canary in the coalmine.”
He also said that Texas Instruments recent warning — which blamed Nokia — is probably just the tip of the Iceberg.
Meanwhile, the big semiconductor ETF is off about 10% from its recent highs.
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