You are here:

Apple boosts UK semiconductor shares

Created:
23 October 2007
Updated:
25 October 2007
Written by:
Tim Bradshaw

UK semiconductor shares sprang to life this week in response to strong results from Apple, in which the iPod maker said it was looking forward to its "best December quarter ever".

Advertising

Apple's performance was due to desktop Mac sales than personal devices, but Christmas confidence boosted makers of components for its iPod and iPhone lines. Wolfson's shares leapt 7 per cent, while Arm, CSR and Imagination were all up around 3 per cent, despite disappointing results from Texas Instruments that raised renewed fears of an inventory-related slowdown in mobile phones.

Analysts at Citi say that while neither CSR nor Wolfson have made much progress since the inventory shocks of a year ago, it is "time to forgive and forget". "The early reporters this season in European Semis have provided plenty of cause for optimism," said Citi analysts, "and we see little reason for this trend to halt with either of these stocks. Both stories warrant a closer look."

The broker says that Wolfson is more likely than CSR to beat expectations in its forthcoming third-quarter results, thanks to strong sales into satellite navigation systems, iPods and Sony's PlayStation Portable. The imminent launch of its combined audio and power management system and the Christmas period should also ensure a good outlook but news on a new high profile design win would really boost the shares, and reassure investors after Wolfson lost its place in the original iPod classic to a cheaper competitor.

Apple's results, the first since its iPod range was updated, are an important psychological boost at a time when concerns about consumer spending were beginning to cast a shadow over Christmas hopes for the electronics industry. But US chip giant Texas Instruments' weak third-quarter results could support the view that mobile device manufacturers are winding down chip inventories. "The read across is clearly negative for Arm," say analysts at Dresdner Kleinwort, who believe that Arm's "stretched outlook" requires "very strong improvement" in smart phone demand.

For now, there's little sign of a slowdown in the broader market. Global semiconductor sales in August increased 4.5 per cent on August 2006 to $21.5bn (£10.5bn), according to the Semiconductor Industry Association, with automotive products seeing particular growth.

IC VIEW

For long-term holders, Arm is widely seen as the best choice in the UK semis due to its historic revenues and more resilient business model. But, in the short-term, read-across from Texas Instruments and the weak dollar leave the shares high enough at 153p. CSR and Wolfson tend to perform in tandem, yet the market looks more challenging for CSR, with its narrow focus on Bluetooth, than for Wolfson, with its growing audio expertise. In spite of our poorly performing tip (308p, 10 May 2007), Wolfson remains a buy at 273p. CSR is fairly priced at 623p.

  • Back to top

Win £1,000 or a golf weekend

Enter IC's Fantasy Portfolio competition for the chance of winning £1,000 or a luxury golf weekend, courtesy of ETX Capital and Celtic Manor.

Enter here for your chance to win

Advertorial Feature

Take control of your investing with CFDs

Have you ever watched a move in the markets that you saw coming, but you weren't able to exploit?

by Dominic Picarda

Advertorial Feature

Spread your risks with spread trading

With so many big moves in the world's financial markets, there have seldom been more opportunities around for spread traders. Isn't it time you joined them?

by Dominic Picarda