Citibank reiterated its optimistic stance on the semiconductor industry, despite data from a previous industry trade organization showing sales in April were below seasonal levels.
According to data from the Semiconductor Industry Association, sales in April were $44.9 billion, down 11.6% month-on-month but up 17.3% year-on-year. This is higher than Citibank's expectation of $44.4 billion. Citibank analyst Christopher Danely said the weakness in DRAM and microcontrollers caused the decline.
Despite the softness in April's data, Danely maintains his expectation of 11% year-on-year growth to $583.3 billion in chip sales for the full year.
Danely wrote in an investor report, "Due to a 19% drop in sales in 2023, the most severe adjustment since 2001, we believe there will be inventory replenishment in 2024, and we remain bullish on the industry."
Specifically, due to the weakness in shipment of analog chips and DRAMs, shipments in April, excluding discrete components, declined 14% month-on-month, lower than Danely's expected decline of 13.1% month-on-month and below seasonal average levels. However, the average selling price, excluding discrete products, increased 3.6% month-on-month, higher than the seasonal average decrease of 0.1% and Citibank's expected increase of 0.8%, primarily due to the push from flash pricing.
Danely added that DRAM prices have been rising continuously since the second half of last year and are expected to increase by 53% year-on-year in 2024.
Micron Technology (MU.US) remains Citibank's top pick in the industry and also rates AMD (AMD.US), Broadcom (AVGO.US), Analog Devices (ADI.US), Microchip Technology (MCHP.US), and ON Semiconductor (ON.US) as "buy".