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Semiconductor Sales Dip in November: Can Chipmakers Rebound?

Global semiconductor sales totaled $41.4 billion in November, increasing 9.8% on a year-over-year basis. However, semiconductor sales posted a month-over-month decline for the first time in nine months. Trade disputes between the United States and China have been taking a toll on tech stocks, particularly chipmakers for a while now.

Despite that, semiconductors stocks put up an impressive show in most part of 2018. That said, chipmakers finally seem to be feeling the heat with semiconductor sales taking a hit in November. Moreover, analysts predict that chip stocks are likely to witness modest growth in 2019.

Semiconductor Sales Decline in November

Per the Semiconductor Industry Association (SIA), global semiconductor sales totaled $41.4 billion in November, increasing 9.8% year over year. However, semiconductor sales declined 1.1% from October. Per SIA, global semiconductor sales totaled $41.8 billion in October. Although the three-month average semiconductor sales increased every month in 2018, chip sales have somewhat moderated over the last few months.

Semiconductor sales have increased sequentially since February, after it declined 2.2% in January. Also, World Semiconductor Trade Statistics (WSTS) expects semiconductor sales to hit a record high of $477.9 billion in 2018, an increase of 15.9% from 2017, when industry sales set an all-time high of $412.2 billion.

That said, chip stocks have come under pressure in the last few months, which is taking a toll on stocks. Moreover, despite an impressive show by chip stocks, the annual global semiconductor market is projected to grow a modest 2.6% in 2019.

Trade Disputes Hurt Chip Stocks

Chip stocks have been largely responsible for the long-running market rally. However, trade disputes have been building pressure on chip stocks for a while now. The PHLX Semiconductor index has declined 15.1% in the past three months.

China happens to be one of the biggest markets for semiconductors, with the United States being the biggest semiconductor manufacturing country. In fact, China accounted for 17% of total semiconductor sales in November. However, China’s economic slowdown has been hurting companies that have operations in that country.

In the last few months, shares of all major chipmakers have suffered. Shares of Advanced Micro Devices, Inc. and Amkor Technology, Inc. have declined 33.8% and 10.8%, respectively, in the past three months, while Applied Materials, Inc. and Maxim Integrated Products, Inc. have lost 14% and 10.8%, respectively. Each of the above stocks carries a Zacks Rank #3 (Hold).

Shares of NVIDIA Corporation, Texas Instruments Incorporated, Analog Devices, Inc. and Micron Technology, Inc. have declined 52.5%, 12.7%, 6.4% and 27.5%, respectively in the past three months.

Moreover, earlier in December, investment bank UBS predicted that semiconductor industry revenues will decline in 2019, the first time since 2015. UBS expects semiconductor industry revenues to drop 4.3% in 2019, due to a decline in memory chip sales. Understandably, chipmakers are having a tough time and it needs to be seen if semiconductor stocks can overcome the obstacles in 2019.