It appears business conditions are bifurcating in the semiconductor sector with the communications, automotive and industrial-end markets strong and the PC and handset end-markets weak. We believe aggregate end-demand remains stable as multiple semiconductor companies continue to have book to bills above parity.
It's critical to avoid potholes -- Intel (ticker: INTC), Advanced Micro Devices (AMD), RF Micro Devices (RFMD). We believe investors should avoid companies with high PC and wireless exposure such as Intel, AMD and RF Micro due to downside to consensus estimates.
We believe investors should focus on companies with margin leverage and exposure to the strongest end-markets -- communications, industrial and automotive -- such as Xilinx (XLNX), Analog Devices (ADI), Texas Instruments (TXN) and On Semiconductor (ONNN).