Chip companies ASML and Texas Instruments raised sales forecasts, in another sign consumers are buying more gadgets, sending technology shares higher on Thursday.
National Semiconductor Corp further underscored a recovery in the semiconductor industry when the chip maker later on Thursday reported quarterly results and an outlook that handily topped Wall Street estimates.
Dutch ASML cited improved expectations of consumer demand and higher chip prices in some markets, while Texas Instruments identified a broad sector recovery.
Investors are looking for signs to strengthen the underlying positive mood on the market, Pohjola Bank analyst Hannu Rauhala said.
National Semi, which saw a return of industrial demand, forecast second-quarter revenue between $325 million and $340 million, exceeding average expectations for about $315.46 million.
But shares of the Santa Clara, California-based company -- whose chips are used in cell phones like Apple Inc's iPhone, Palm Inc's Pre smartphone and other electronics -- fell 1.5 percent after-hours as investors cashed in recent gains.
The stock had gained more than 30 percent in the past two months as investors bet on a chip-sector recovery in the latter part of the year.
National Semi chief executive Brian Halla told Reuters in an interview two factors were at work.
One is an increased demand from the broad market. The other is that the distributors starting with and during this credit crunch have cranked down their inventories so far that they're starting to actually pass up on business because they don't have a product on the shelf when the customer comes in, Halla said.
What happened in July was a significant uptick in bookings for all of us as distributors restocked their shelves and got ready for an improvement in demand, he added.
Texas Instruments said it expected stronger revenue in every segment than it had forecast in July, boosting shares in its key client, Nokia Oyj.
Shares in the world's top cellphone maker closed up 0.97 percent, with chipmakers STMicroelectronics NV and Infineon Technologies AG closing up 2 percent and 3 percent, respectively.
Shares in ASML, the world's largest maker of semiconductor lithography machines which map out electronic circuits on silicon wafers, rose 4.6 percent to their highest level since late 2007 after it raised its sales forecast on Thursday.
ASML said it expected sales above 500 million euros ($729 million) in both the third and fourth quarters. It had said in July it expected third-quarter net sales of around 450 million euros.
The second-half outlook for consumer goods has improved compared with the first half. Expectations are turning positive, an ASML spokesman said.
Until early this year, ASML customers were grappling with oversupply, falling memory prices and pressure to consolidate. Another problem was the increasing difficulty finding financing for ASML's machines which cost up to 30 million euros.
Analysts view the company's order book developments as a barometer for expectations of big chipmakers.
With TSMC and other foundry customers becoming more optimistic and prices of DRAM (and other) memories improving, customers are turning more positive again, Petercam analyst Eric de Graaf said.
On Wednesday, Texas Instruments raised its third-quarter earnings estimate to 37-41 cents per share from a previous 29-39 cents. The consensus forecast had been 36 cents, according to Reuters Estimates.
The company also hiked its third-quarter revenue forecast to $2.73-$2.87 billion from a previous $2.5-$2.8 billion. Analysts had expected $2.68 billion, according to Reuters Estimates.
The companies' improved results and outlooks are the latest sign of a possible consumer rebound, after top chipmaker Intel Corp raised its outlook for third-quarter revenue and PC-maker Dell Inc beat earnings expectations last month.
Chipmakers have suffered as the economic downturn has dried up demand for personal computers, mobile phones and other electronics. The Semiconductor Industry Association forecast in June that chip sales would fall 21.3 percent to $195.6 billion in 2009, but would rebound 6.5 percent to $208.3 billion in 2010.
The top contract chipmaker Taiwan Semiconductor Manufacturing Co Ltd posted a 7 percent year-on-year fall in August sales on Thursday, but analysts said the company was on track to meet its third-quarter sales target due to rising technology demand.
On Tuesday, cross-town rival UMC posted an 11 percent annual rise in its August sales.
(Additional reporting by Baker Li in Taipei and Harro ten Wolde in Amsterdam, Writing by Tarmo Virki; Editing by Dan Lalor and Muralikumar Anantharaman)