Lehman's on chips: 1st half of '98 sluggish, followed by rebound...
Headline: Semiconductors: 1998 Semiconductor Outlook Revisited (Phase 4)
Author: M. A. Gumport, CFA 1(212)526-5368
Company:
Country: IND CUS
Industry: SEMICO
Today's Date : 03/12/98
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* 1998 SEMICONDUCTOR OUTLOOK REVISITED AGAIN: 5% 1998 GROWTH NOW LIKELY (OLD: 10%).
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SIA JANUARY DATA EVEN WEAKER THAN EXPECTED; 5% 1998 GROWTH NOW SEEMS LIKELY. We continue to believe late 1998 year-over-year growth comparisons will rebound over 20% (particularly December). But data now shows 1998 off to an even more sluggish start than expected, and 1Q98 world chip sales look roughly 6-7% below 4Q97. Asia-Pacific is part of the problem, but the US is quite slow, too. We do not believe the US is moving into a recession. We see ongoing inventory corrections in part due to over optimism on late 1997 PC sales and, more importantly, due to ongoing changes in the structure of the PC business (aggressive price cuts by the processor market leader plus a move by buyers to lower priced machines). We believe low price PCs (and the emergence of DVDs, digital broadcasting, digital cable, and digital cameras) will make for a strong late 1998. ALL OF WHICH SAID, WHILE CHIP STOCKS REPRESENT STRONG VALUE, THE RALLY HAS ALREADY PAUSED, AND THAT PAUSE SEEMS LIKELY TO CONTINUE A FEW MONTHS UNTIL LATE 1998 PROSPECTS ARE BETTER VISIBLE. |
