Chip Fabs: Merrill Turns Bullish, Upgrades Some Stocks

Bank of America/Merrill Lynch analyst Daniel Helyar and his colleagues who cover the semiconductor sector today turned bullish on the contract chip fabs, triggering an impressive rally in the group.

The bullish stance is a switch from a more bearish position Merrill took in early June.

Helyar writes in a research note today that there are now signs that customer inventory risk is diminishing, and asserts that demand prospects for the second half and for 2010 appear to be improving. He revised up his 2010 growth forecast for the semiconductor contract manufacturing sector to 23%, from 15%.

Here’s a rundown on his ratings changes:

• Taiwan Semiconductor (TSM) to Buy from Neutral.


• Siliconware (SPIL) to Buy from Neutral


• Advanced Semiconductor Engineering (ASX) to Buy from Neutral.


• ASM Pacific (0522.HK) to Buy from Neutral.


• Kinsus (3189.TW) to Buy from Neutral.


• United Microelectronics (UMC) to Buy from Underperform.


• Semiconductor Manufacturing International (SMI) to Neutral from Underperform.

In today’s trading:

• TSM is up 24 cents, or 2.6%, to $9.42.


• SPIL is up 37 cents, or 5.9%, to $6.64.


• ASX is up 22 cents, or 7.4%, to $3.21.


• UMC is up 17 cents, or 6.4%, to $2.77.


• SMI is up 9 cents, or 3.7%, to $2.50.


• In Honk Kong,  ASM Pacific is up 75 cents, or 1.8%, to HK$42.70.


• In Taiwan, Kinsus is up 4.50, or 7%, to 69.