Canaccord Genuity Morning Coffee on iShares Semi ETF (SOXX): Pull Up Your SOXX

May 25, 2012 10:31 AM EDT
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Canaccord Genuity Morning Coffee on iShares Semi ETF (Nasdaq: SOXX): Pull up your SOXX.

Canaccord Genuity Technology Analyst Bobby Burleson has been meeting with companies in the Taiwan electronics supply chain this week, with key takeaways being incrementally lower expectations for notebooks, a continued expectation for H2 snapback on smartphone and consumer, and limited negative implications from recent foundry slowing in terms of read-through for fabless IC demand in H2/12. Following soft April activity, notebook ODMs have seen recent cuts and are concerned that hub activity could disappoint in June if customers choose to delay new models. Universally, companies believe Ultrabook pricing is too high and expect penetration well below 40% of consumer by Q4, especially if Macbook Air is refreshed at a sub-$800 price point. Win8 is also not viewed as a 2012 driver given incremental cost of bundling and timing of release (shipping Sept). There were constructive views on Q3 from substrate suppliers and fabless semi limit the usefulness of foundry adjustments as leading indicator of broader semi slowdown, in Burleson’s view. He notes that, excluding Apple (Nasdaq: AAPL) supply chain, wafer cuts to Q3 tended to be pulled into Q2 and foundries had expressed double ordering concerns for a couple of months now in terms of Q3 forecast. He also notes that an increase in 28nm yields could drive upside for foundry, OSAT and substrate in Q3. Burleson remains cautious on PC plays, preferring suppliers with end-market diversification and low PC exposure such as Analog Devices (NYSE: ADI), improving cost structure, Intersil (Nasdaq: ISIL), or product cycles, Broadcomm (Nasdaq: BRCM) and Integrated Device Technology (Nasdaq: IDTI).

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