Bank of America, which now includes Merrill Lynch which has some formidable semiconductor industry analysts, reckons the chip industry will grow 21% next year.
"Indications of improved global GDP growth, and a definitive inflection in the 3-month moving average of the computers and electronic component of US durable goods shipments, bode well for electronic demand growth," said the bank in a broker's note.
The bank particularly favours five semiconductor companies: Maxim, Intel, LSI, Marvell and National Semiconductor. All four had their share ratings upgraded by the bank.
The bank's analysis suggests that there is a turnaround in end demand in the electronics industry, it reckons that inventories which were below 'equilibrium levels', and it believes the industry is on a favourable cyclical trend.
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On the macro-economic scene, the bank is now bullish. "Recent macro data," says the note, supports: "A definitive turn in end demand, thus warranting a more constructive stance."
The bank said there had been a 'definitive inflection' in the 3-month moving average for the electronics component of U.S. durable goods shipments which, according to the bank, is: "Historically a reliable indicator of electronic demand and an early predictor of a fundamental turn in 2003."
The Bank of America note concludes: "Our industry model now suggests 21 percent growth in 2010 vs. 14 percent prior - driven by an improving trajectory of electronic demand against a backdrop of still lean supply chain inventories - in turn implying the potential for continued upward revisions to estimates," said the bank's note, adding: ""Q3, thus, represents a window of opportunity for continued ownership of the group." (i.e. the group of five recommended shares).