China Leads Semi Recovery; Semis Lead The World Recovery.

SMIC, the Shanghai foundry company, is now saying that orders from Chinese end product manufacturers are picking up fast.

When China’s OEMs, ODMs, and contract manufacturers start seeing a manufacturing upturn, the whole world can breathe a sigh of relief that the economic worst is over.

“Greater China has rebounded quickly”, said SMIC boss and former TI-er, Richard Chang. Chang said that SMIC’s capacity utilization rate doubled to more than 70% in Q2 from Q1.

Greater China, from where SMIC gets half its revenues, has seen the biggest regional recovery of any of the world’s regions, based on demand for telecoms and consumer products, according to Chang.

SMIC which has hardly ever had a profitable quarter since its IPO is saying its Q409 could be profitable.

Chang’s comments follow fast on the dramatic announcement of UMC at the end of March which amazed everyone when it said its Q209 wafer shipments will be double those of Q1, and it expects its fab utilisation will shoot up from 30% in Q1 to 75% in Q2, with gross margin going from minus 40% in Q109 to plus 20% in Q2.

It was a similarly bullish tale at Chartered which reckons its fab utilisation will grow to 61 per cent in Q2, from 38 per cent in Q1, based on a rebound in sales and shipments during Q2.

TSMC says it expects to see revenues up 80% in Q2 compared to Q1.

The foundries are early heralds of the semiconductor industry’s health. If they are seeing sharp increases in business, then the return to health of the entire sector is expected to follow.

If that’s the case then the semiconductor industry will be leading the world’s industries in the recovery process.

Why should the semiconductor industry be one of the first industrial sectors to recover?

The answer is: Because it’s stuffed with cash. The companies have billions of dollars as a result of the industry’s practice of hoarding cash in upturns to see them through downturns.

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