Checks with companies up and down the chip industry supply chain show concerns about a slowdown in demand this year are overblown, according to a report from Credit Suisse.
In a client note Tuesday, Credit Suisse analyst John Pitzer reiterated his top picks in the sector, including Intel Corp., Broadcom Corp., Marvell Technology Group Ltd., Micron Technology Inc., ON Semiconductor Corp. and Linear Technology Corp. He rates all of them "outperform."
A year ago, semiconductor companies were reeling as demand dropped off for chips that help run everything from personal computers to autos. Since then, the sector has rebounded, with customers replenishing depleted inventories.
But Pitzer said concern has grown that chip buyers are "double ordering" — purchasing twice as much of what they need to make sure they can get enough — which could lead them to once again adjust inventory levels to match consumer demand.
"We absolutely believe that there is double ordering," Pitzer said, but added that his checks show a lack of manufacturing capacity is making it hard for companies to even meet existing orders, much less overshoot what they need.
He also predicted that the pace of chip orders could pick up again significantly in the second half of the year if corporations start replacing older machines again.
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