Cowan LRA Model's 2Q15 Semiconductor Sales Forecast For 2015 & 2016

Cowan LRA Model's 2Q15 Semiconductor Sales Forecast For 2015 & 2016

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Description: The subject paper presents the latest 2015 and 2016 forecast expectations for global semiconductor sales and corresponding year-over-year sales growth predictions looking out over the next six quarters, that is, from the 3Q15 through the 4Q16. These latest, updated forecast results are derived from exercising the Cowan LRA Model using June 2015's actual sales numbers gleaned from the just posted WSTS June 2015 HBR .

 
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Contents:
SIA/WSTS Releases Global Semiconductor Sales For 2Q15; The Cowan LRA Model Projects Its
Monthly Update For 2015, 2016 Sales And Sales Growth Forecast Expectations
Date of Write-Up: August 12th, 2015.
Author: Mike Cowan (Independent semiconductor industry watcher and creator of the Cowan LRA Model for forecasting
global semiconductor sales)

The five tables shown below summarize the latest semiconductor sales forecast numbers and associated yr-o-yr
sales growths. These forecast results are derived from the Cowan LRA forecasting model operating on the actual
June 2015 global semiconductor sales numbers published by the WSTS which can be found on their website
(posted August 10th, 2015) at the following URL: http://www.wsts.org/Teaser-Left/Historical-Billings-Report.
TABLE 1. Updated Cowan LRA Model’s Global Semiconductor Sales and Sales Growth Expectations
Time
Period
1Q

2014 (Final)
Sales
$78.445

2Q
1H

$82.322
$160.767

3Q
4Q
2H

$87.699
$87.377
$175.076

Full Year

$335.843

2015 Sales
Actuals/Frcst

2014=>15
Sales Grwth

2016 Sales
Frcst

2015=>16
Sales Grwth

$83.108
$83.978
$167.086
$90.938
$89.160
$180.097
$347.183

5.9%
2.0%
3.9%
3.7%
2.0%
2.9%
3.4%

$86.322
$89.051
$175.373
$96.212
$94.020
$190.233
$365.606

3.87%
6.0%
5.0%
5.8%
5.5%
5.6%
5.3%

Notes - Sales are in $billions; Italicized numbers are Cowan LRA Model generated forecasts.
Sources: WSTS (2014 Final Sales) & Cowan LRA Forecasting Model, August, 2015

TABLE 2. MOST RECENT WSTS (SPRING 2015) FORECAST VS. LATEST COWAN LRA MODEL’s FORECAST
W S T S FORECAST (SPRING 2015):
2014
2015 Est. 2016 Est.
O/A SALES ($B)
$335.843 $347.248 $358.924
Yr-O-Yr Sales Grwth
9.9%
3.4%
3.4%

2017 Est.
$369.587
3.0%

Cowan LRA Model:
2015 Est. 2016 Est.
$347.183 $365.606
3.4%
5.3%

TABLE 3. BY-MONTH EVOLUTION OF THE COWAN LRA MODEL’s GLOBAL
SEMICONDUCTOR SALES & GROWTH EXPECTATIONS FOR 2015 AND 2016
MONTH Of WSTS Sales Data ===>

JAN 2014

FEB 2014

MAR 2014

APR 2014

MAY 2014

DATE Of Forecast Update

3-07-14

4-09-14

5-12-14

6-08-14

7-10-14

JUN 2014
8-07-14

2015 Sales Forecast ($B)

$360.412

$358.231

$345.177

$347.616

$351.125

$349.198

SEQUENTIAL PERCENT CHANGE (%)

----

-0.6%

-3.6%

0.7%

1.0%

-0.5%

2014=>15 Sales Growth Frcst Est.

6.0%

4.7%

4.2%

4.4%

4.6%

4.4%

MONTH Of WSTS Sales Data ===>

JUL 2014

AUG 2014

SEPT 2014

OCT 2014

NOV 2014

DEC 2014

DATE Of Forecast Update

9-08-14

10-09-14

11-09-14

12-08-14

1-10-15

2-10-15

2015 Sales Forecast ($B)

$350.807

$350.689

$347.239

$349.591

$349.574

$350.008

SEQUENTIAL PERCENT CHANGE (% )

0.5%

-0.03%

-1.0%

0.7%

0.00%

0.12%

2014=>15 Sales Growth Frcst Est.

4.6%

4.6%

4.3%

4.2%

4.1%

4.2%

MONTH Of WSTS Sales Data ===>

JAN 2015

FEB 2015

MAR 2015

APR 2015

MAY 2015

JUN 2015

DATE Of Forecast Update

3-12-15

4-12-15

5-14-15

6-10-15

7-13-15

8-11-15

2015 Sales Forecast ($B)

$367.889

$365.360

$351.727

$352.423

$353.745

$347.183

SEQUENTIAL PERCENT CHANGE (% )

5.1%

-0.7%

-3.7%

0.20%

0.38%

-1.9%

2014=>15 Sales Growth Frcst Est.

9.5%

8.8%

4.7%

4.9%

5.3%

3.4%

MONTH Of WSTS Sales Data ===>

DEC 2014

JAN 2015

FEB 2015

MAR 2015

APR 2015

MAY 2015

DATE Of Forecast Update

2-10-15

3-12-15

4-12-15

5-14-15

6-10-15

7-13-15

2016 Sales Forecast ($B)

$371.089

$389.915

$388.951

$370.164

$371.292

$372.880

5.1%

-0.2%

-4.8%

0.30%

0.43%

2015=>16 Sales Growth Frcst Est.

6.0%

6.0%

6.5%

5.2%

5.4%

5.4%

MONTH Of WSTS Sales Data ===>

JUN 2015

JUL 2015

AUG 2015

DATE Of Forecast Update

8-11-15

SEQUENTIAL PERCENT CHANGE (% )

2016 Sales Forecast ($B)

$365.606

SEQUENTIAL PERCENT CHANGE (% )

-2.0%

2015=>16 Sales Growth Frcst Est.

5.3%

TABLE 4. BY-MONTH EVOLUTION OF THE COWAN LRA MODEL’s MOMENTUM INDICATOR
SEMICONDUCTOR
SALES
DATA FOR:

SALES
FORECAST
EST. ($B)

WSTS
ACTUAL
SALES ($B)

COWAN LRA MODEL'S
MOMENTUM
INDICATOR, MI *

JUN 2014
JUL 2014
AUG 2014
SEPT 2014
OCT 2014
NOV 2014
DEC 2014
JAN 2015
FEB 2015
MAR 2015
APR 2015
MAY 2015

$30.696
$26.447
$27.807
$33.503
$27.777
$27.799
$30.051
$25.893
$26.563
$32.853
$26.443
$27.383

$30.184
$27.600
$27.760
$31.512
$29.018
$28.168
$29.879
$27.234
$26.205
$29.784
$26.903
$27.843

-1.7%
4.4%
-0.2%
-5.9%
4.5%
1.3%
-0.6%
5.2%
-1.3%
-9.3%
1.7%
1.7%

JUN 2015
JUL 2015 Est.

$32.213
$27.619

$29.409
TBD

-8.7%
TBD

Sources: Cowan LRA Forecasting Model and WSTS
* NOTE: MI = [(Column #3 – Column #2) / Column #2], that is, the percent
delta between the actual monthly sales and the previous month’s forecasted sales.

TABLE 5. MONTH-BY-MONTH TRACKING OF YTD (Year-To-Date) CUMULATIVE
SALES and CORRESPONDING YTD SALES GROWTHS FOR 2014 and 2015

YTD * SALES
(TIME FRAME)

2014 YTD *
SALES ($B)

2013=>14 YTD
SALES GRWTH

JANUARY

$25.032

8.2%

FEBRUARY YTD

$50.375

13.9%

MARCH YTD

$78.445

11.3%

APRIL YTD

$104.040

10.7%

MAY YTD

$130.864

10.6%

JUNE YTD
JULY YTD EST.

$160.767

10.8%

$188.429

10.5%

AUGUST YTD

$216.642
$248.466

2014=>15 YTD
SALES GRWTH

9.0%
5.9%
5.9%
5.7%
5.2%
3.9%
3.3%

10.4%

SEPTEMBER YTD

2015 YTD *
SALES ($B)
$27.273
$53.347
$83.108
$109.949

10.1%

OCTOBER YTD

$277.480

10.2%

NOVEMBER YTD

$305.964

10.1%

DECEMBER YTD

$335.843

$137.677
$167.086
$194.705

9.9%

* => YTD - Year To Date Cumulative Sales (Source: SIA / WSTS, August 2015)

According to the Cowan LRA Model July 2015’s sales forecast estimate is predicted to come in at $27.619 billion
(see Table 4) which would result in a 3MMA sales forecast estimate of $28.252 billion. This latter number (3MMA
sales) is normally reported by the SIA in its monthly press release (typically one week prior to the WSTS posting
its actual monthly sales numbers). Next month’s July 3MMA sales will be reported during the first week of
September, 2015.

Mike Cowan – Biographical Sketch
Mike Cowan, an independent semiconductor industry analyst and developer of the Cowan LRA Model for
forecasting global semiconductor sales, is a 50-year semiconductor industry veteran. He enjoyed a 36.5-year
career at IBM Corp.’s Microelectronics Division in East Fishkill, N.Y., where he was involved in many facets of
semiconductor chip development and manufacturing engineering, including both technical and management
responsibilities. Over his last ten years at IBM, as a senior technical staff member, he was involved in strategy
development and competitive analysis activities focused on the semiconductor industry, and developed a wide
range of top-down and bottom-up models for predicting the dynamics of the semiconductor industry. Following
his retirement from IBM in Jan. 2002 he became an independent semiconductor industry watcher, and created,
upgraded and perfected his semiconductor sales forecasting model. Later in 2002 he launched the publishing of
his monthly global semiconductor sales forecast which he has been doing ever since. Cowan earned both BS
and MS degrees in Physics from Wayne State University in Detroit, Michigan, and an MS in Electrical Engineering
from Syracuse University in New York.

The Cowan LRA Forecasting Model - Abstract
A unique semiconductor sales forecasting model has been developed to facilitate the determination of future
global sales of the semiconductor industry. The Cowan LRA (Linear Regression Analysis) Model, which
forecasts global semiconductor sales, is a mathematically based model that features statistical analysis of the
past 31 years of historical, monthly global semiconductor sales numbers that are collected and published by
the World Semiconductor Trade Statistics (WSTS) organization. The model is a dynamic, mathematically pure
view of near-term worldwide semiconductor sales looking forward over the next eight quarters. The model is
devoid of any economic assumptions or emotional biases. It strictly exploits linear regression analysis
techniques operating on the "appropriately transformed" actual monthly semiconductor sales numbers, thereby
"rendering" the global semiconductor sales data highly linear and, therefore, very amenable to linear
regression statistical analysis. The numerical transformation of the past 31 years of monthly actual sales
numbers - from 1984 through 2014 - that is invoked is not a complicated mathematical expression but very
straight forward and "makes sense physically," yielding extremely high linear regression correlation coefficients
of 0.97 and greater. In exercising the forecasting model each month, a total of eight distinct sets of linear
regression parameters (of the format y = mx + b) are employed to calculate the resulting global semiconductor
sales forecast estimates for each of the next eight quarters associated with the model's forecast horizon.
It should be emphasized that each month's actual global semiconductor sales number released by the WSTS
is a "lagging indicator" because it is published a full month after the fact. Fortunately the Cowan LRA Model,
however, "turns" this lagging monthly sales result into a "leading indicator" by virtue of its near-term forecasting
capability that looks out over the next eight quarters. This is the "beauty" of the model and, therefore, makes it
dynamic in the sense that it is exercised each month using the most recent actual global S/C sales numbers.
Thus it can rigorously "track" the near-term sales forecast outlook of the global semiconductor industry on a
real-time basis. Consequently, the model's monthly sales forecast does not "sit still" but evolves each month
because conditions change rapidly and unexpectedly in the semiconductor industry, and market forecasters
are hard pressed to keep up with these changes. How can industry management be sure that a forecast
issued two, three or more months ago is still relevant to what's happening in today's market? Following and
tracking the Cowan LRA Model’s monthly forecast results alleviates this uncertainty.
For more information on the Cowan LRA Model the reader is encouraged to see the following two
articles:


1. An Overview Of The Cowan LRA Model For Forecasting Global Semiconductor Sales
Apr 27th 2014
The author presents a descriptive overview of the semiconductor sales forecasting model, called the Cowan LRA
Model, that he has created, developed, and exercised each month over the past ten years in order to predict sales and
corresponding sales growth ...



2. Forecasting Global Semiconductor Sales By Exploiting Linear Regression Analysis (LRA)
May 2nd 2014
The subject Powerpoint presentation provides insight re. the author's "journey" into leveraging linear regression
analysis in developing a global semiconductor sales forecasting model. This invited presentation, as the title page
explains, was ….