The Chip Chumps Will Shock the Street

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Get ready for a whole lot of surprises in the semiconductor industry.

As we head into the last earnings season of 2009, the Semiconductor Industry Association (SIA) reports surprisingly strong chip sales everywhere you look. Pegged at $19.1 billion, third-quarter sales should come in about 5% above the second quarter's total of $18.2 billion. That's a 16% decline from 2008 levels, which may not sound strong on the surface, but considering that the first six months of this year brought 25% year-over-year sales declines, it's a marked improvement for the industry.

The report doesn't break out individual companies from the data, but it does show strong sales across all geographies and most end-market sectors. The "cash for clunkers" program and other incentive plans boosted sales to the automotive sector, while consumer demand for personal computers and fancy gadgets picked up over the summer. The recovery looks slower in Europe and faster in Japan and Asia, but it's brisk business across the globe.

Here's how the 16% annual sales drop compares to analyst projections for a few major industry players in upcoming quarters:

	Expected Year-Over-Year Sales Drop	Beating or Lagging the Industry
Texas Instruments (NYSE: TXN)	(17.0%)	(1.0%)
Intel (Nasdaq: INTC)	(11.8%)	4.2%
Advanced Micro Devices (NYSE: AMD)	(29.4%)	(13.4%)
NVIDIA (Nasdaq: NVDA)	(7.5%)	8.5%
Qualcomm (Nasdaq: QCOM)	(18.6%)	(2.6%)
National Semiconductor (NYSE: NSM)	(20.6%)	(4.6%)
Maxim Integrated Products (Nasdaq: MXIM)	(12.8%)	3.2%

Estimates from Yahoo! Finance.

I realize that not every company will land squarely at the industry average, of course. In particular, AMD should fall well below the -16% mark as Intel's Core 2 assault has taken its toll over the last 12 months. And this small sample is obviously not an accurate representation of the entire industry.

Still, I see plenty of room for positive sales surprises in the chip sector, based on this report and on the trends we've seen this summer. Industry research outfit iSuppli concurs and has raised its 2009 sales estimates for this industry. In other words, don't be surprised by the coming flood of surprises. We've seen it coming already.