Sector Snap: Semiconductors move higher

The chip sector outpaced the wider technology market Monday, helped by a bullish Goldman Sachs report on the global chip market.

The chip sector, as measured by the Philadelphia Semiconductor Index, rose 6.6 points or 1.57 percent to 428.30 in midday trading.

Goldman Sachs analyst James Covello said he was taking a more positive view on chip stocks, as he expects global chip inventories to be used up in the 2008 second half.

He upgraded U.S. chip companies to "Attractive" from "Neutral" and listed Intel Corp., Taiwan Semiconductor Manufacturing Co. and German chip maker Infineon Technologies A.G among his global top picks.

Shares of Santa Clara, Calif.-based Intel rose 23 cents to $25.23 in midday trading. Taiwan Semiconductor rose 14 cents to $11.79 and Infineon rose 8 cents to $11.04.

Covello said he was upbeat on prospects for the 2008 second half and said he has been waiting for the "imminent" inventory correction for the last 12 to 18 months.

"With semi fundamentals poised to improve in the 2008 second half...we are comfortable in taking a more aggressive stance on the sector and expect stocks to outperform the market into 2009," he said.

However, Covello warned that memory chips remain in excess supply and he expects slow demand through the first half of 2009.

Shares of Milpitas, Calif.-based memory chip maker SanDisk Corp. fell 32 cents to $32.12 in midday trading.