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China stimulus fuels analog market rebound

Posted: 26 Mar 2009 ?? ?Print Version ?Bookmark and Share

Keywords:analog market? China stimulus plan? LCD?

The analog market is looking up thanks to the stimulus package in China.

FBR has raised its estimates for Linear Technology Corp. to the high end of its Q1 guidance. Average selling prices (ASPs) for analog are up, while demand in China is another major factor.

"Our meetings with channel sources in China and Taiwan reinforced our assumption that revenue momentum in our covered analog companies is currently underway and should continue past the close of Q1," said Vernon Essi, an analyst with Needham & Co. LLC, in a recent report.

"One of the primary drivers is a consumer stimulus plan implemented by the Chinese government designed to drive consumption of electronics and appliances by citizens living outside the major urban regions," he said. "This has prompted a supply chain scramble in select markets, namely LCD TV, netbooks, consumer based notebooks and low-end handsets."

There are other positive signs. "While there are widespread rumors of more Chinese stimulus to come, some suppliers are expressing skepticism that these recent order gains will extend past the short-term," he added.

Increasing demands
In another major data point, analog chipmaker Linear is seeing better demand. "Recent channel checks suggest Linear Tech's Q1 business trends are stabilizing or even improving, and that the firm's revenues are likely tracking towards the high end of the firm's calendar Q1 revenue guidance range of minus 15 percent to minus 20 percent quarter over quarter," said Craig Berger, an analyst with FBR, in a separate report.

"Specifically, we are modeling Q1 revenues to decline by 15.5 percent sequentially, better than the consensus revenue estimate of minus 19 percent sequentially," he said. "We think better demand pull from distributors and some inventory replenishment in the channel are driving some near-term upside."

FBR listed three reasons for the upgrade: "(1) better-than-expected distributor shipments thus far in Q1; (2) chip inventory levels as of mid-March being worked down to hand-to-mouth levels; (3) increasing demand for electronic components (handsets, PCs, white goods) in China as a result of the China stimulus package that included coupons and discounts for these wares."

Beyond Q1, Linear is seeing even better demand. "Consistent with many chip firms, we believe that orders have ramped over the past month, and backlog is beginning to build," he said. "Specifically, we think calendar Q2 sales will grow 3 percent to 5 percent sequentially, better than Street estimates of 1 percent sequentially," he added. "We have seen some initial lengthening of chip lead times, but we think further lead-time extensions could drive more meaningful Q2 or Q2 shipment growth."

- Mark LaPedus
EE Times

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