Semiconductors: Why so Bad?

As many have noted, this quarter seems to be another great one for technology. Stocks like Apple, Rimm, Nokia and Microsoft are powering higher as investors pile in. These companies continue to attribute their strength in particular to strong consumer electronics markets.

It goes without saying that virtually every consumer electronics device is powered by a chip. Intel's chips drive computers built by Dell, HP or anyone else that run Vista or Windows. NAND chips going into ipods and Iphones and just about everything. Marvell chips are in all of the Rimm devices. So are Broadcom's. Yet, these stocks are collapsing.

I looked over the earnings to try to understand why this is happening. Nevertheless, many chip manufacturers are actually beating their numbers by as much as the users of their products (eg. Intel and SanDisk) which others are missing (Texas Instruments and Broadcom). Yet, they are all falling.

Why else could this be happening? Is it just coincidence that these stocks are getting taken apart during earnings no matter how well they report and how strong the end demand for their chips are?

I've heard many explanations. One is that their margins are getting squeezed by the Apple's an RIMMs or this world. While Jobs and the others would love to squeeze the chips, every indication is that margins are improving, not declining. Other explanation, mentioned in this article from theStreet.com, is that this is related to excessive ordering my manufacturers (so called "double ordering" to protect their supply sources), but the article seems to suggest that it is not the reason.

In the end, all of the explanations that I have read fail. What is clear is that chips have been a poor place th be for many years. If they are not performing in this massive tech boom, they may never perform. While I am coming to believe that hedge funds will drive any sector or subsector however they want to drive them and create whatever rationale they want, I am also starting to believe that chips are just always going to be a lousy place to be.