Is talk of chip upturn simply a dead-cat bouncing?

Here we are just three months later and there is genuine talk of a rebound on the market.
Albeit from the bottom of a rather deep financial hole.
 
As Malcolm Penn of analysts Future Horizons said last week, "The data is recovering faster than was thought possible even three months ago, people feel they can build businesses rather than concentrating on survival."

At the centre of any optimism amongst chip firms seems to be a hope that investment in new 3G mobile networks and smartphones will drag the industry out of recession, even possibly ahead of other industrial sectors. 

There is no denying that the numbers still don't seem that encouraging, but last week the market took heart from the message coming out of comms chip suppliers Qualcomm, TI and ST-Ericsson that the rebound in the mobile phone market may be starting.

Qualcomm said it saw increased demand for silicon from the 3G market. Texas Instruments similarly reported a sharp jump in sales in the second quarter compared with Q1.   

Alain Dutheil, CEO of ST-Ericsson, said that the wireless IC market "hit bottom" during Q1. Since then, an end to de-stocking, and a pick up in demand in China, were bringing trading patterns back to normality.

Qualcomm chief executive Paul Jacobs, chief executive, even went so far as saying in an interview with the Financial Times that "things have pretty much come back on the chipset side."

But before we get too carried away, the market is clearly climbing out of a very deep trough.

TI's Q2 sales were well down on this time last year, and the uplift was largely due to an inventory correction which has allowed the semiconductor manufacturer to bring cost in to line with demand. 

Qualcomm still expects Q4 chipset shipments to be down slightly on the encouraging figures for Q3. While ST-Ericsson expects to see a drop of 10% to 12% in the wireless IC market this year.

As I said the bold numbers aren't pretty. But that reflects where the industry has been in the last few months and now there is a real sense of companies putting the behind them and looking to better growth figures ahead, and even before the end of the year.

Few people were being that optimistic in April.   

The worry is how much of this rebound is based on the restocking of the supply chain which has cleared of excess inventory. As Penn points out the industry over-reacted in cutting supply at the turn of the year. 

Inventories of ICs held by the chip manufacturers fell by over $7.5bn between Q208 and Q209, according to US analysts iSuppli.

So some form of recovery in the short term seems inevitable as stocks are replenished.

But if we are looking for more sustainable signs of recovery then it came from Nokia's CEO Olli-Pekka Kallasvuo who believes "demand in the overall mobile device market appears to be bottoming out."

All this talk of a rebound in the chip market could simply be an example of the dead-cat bounce phenomenon fuelled by inventory replenishment. 

Or are there actually green-shoots appearing?