Chips:
Is the run over for the chip stocks? That was the question as the Philadelphia Stock Exchange Semiconductor Index, or SOX, succumbed to a bout of profit-taking, and then angst on Wednesday over potential reduced shipments, before rallying on Thursday and Friday.
The Thursday release of sales figures by Taiwan Semiconductor Manufacturing (TSM:NYSE ADR - news - boards) helped create a bullish drive in semiconductor shares. Taiwan Semiconductor, which did not participate in the May-June rally while it offered 28.5 million American Depositary Receipts, announced that its sales surged 104.8% in June from the same month last year -- a monthly record.
The June sales represented 21% growth from May, while sales in the first six months of 2000 were up 114.2% year over year, due to the continual growth of the global semiconductor market. And Friday, Taiwan Semiconductor Manufacturing Chairman Morris Chang said he expected the semiconductor boom to last at least another two years. "I can't say that semiconductors are no longer cyclical, but think the best and most-bountiful part of this cycle will come at the earliest in mid-2002," he said.
In Europe, STMicroelectronics (STM:NYSE ADR - news - boards), Europe's second-biggest chipmaker, plunged more than 10% Wednesday, but recovered 5.4% on Thursday, and 3.6% on Friday. At about the time when last month's rally peaked, STM announced that while revenue for the quarter ending July 1 is expected to be in line with expectations -- the company reports full financials for the second quarter on July 18 -- the firm's gross margin could exceed 45%, the upper limit of its optimal range. This is due to a combination of better manufacturing efficiency, a better product mix and enhanced prices. Consequently, based on available information, STM anticipates its net earnings will substantially exceed expectations.
About a week after STMicroelectronics' May announcement, Infineon Technologies (IFX:NYSE ADR - news - boards) increased income forecasts for its fiscal third quarter (ending June), due to increased demand for memory products and a better-than-expected price trend. Infineon, which plans to announce third-quarter results on July 26, also has indicated higher memory prices and above-average productivity gains are likely to lead to even higher income in its fourth quarter ending September, if those trends continue. Along with the memory business, Infineon has found consistent demand for products from other segments in wireless and wired communications.
Compared with revised sales forecasts for the worldwide semiconductor industry, Infineon is set to grow significantly faster than the market. The Gartner Group, on May 24, forecast worldwide semiconductor revenue would reach $222 billion this year, an increase of 31% year over year.
Japanese microchip makers also announced Thursday that they expect to make a record investment in chips in the fiscal year to March 2000, as they try to match demand for devices used in mobile phones and digital information products. Top manufacturers increased their capital spending plans for chips from April estimates, led by Mitsubishi Electric, Fujitsu and NEC (NIPNY:Nasdaq ADR - news - boards). Mitsubishi increased its spending plan by a remarkable 163.2%, followed by Fujitsu (127.5%) and NEC (46.7%).
Related to that, Japan's microchip-equipment manufacturers last month reported sales more than doubled in April, the 10th-straight gain after 15 months of decline. Japanese chip-equipment sales soared 116% in April from the same month last year.
As companies retool factories to make chips with smaller circuit-feature sizes and lower power consumption, demand for equipment is rebounding at chipmakers such as Samsung Electronics, TSM and United Microelectronics. That's likely to boost the earnings of many of the biggest producers of microchip-making equipment, such as Applied Materials (AMAT:Nasdaq - news - boards), KLA-Tencor (KLAC:Nasdaq - news - boards), Varian, Novellus Systems (NVLS:Nasdaq - news - boards), Teradyne (TER:NYSE - news - boards), Lam Research (LRCX:Nasdaq - news - boards), ASM Lithography (ASML:Nasdaq - news - boards), Tokyo Electron, Nikon, Canon (CANNY ADR:Nasdaq - news - boards), and Advantest.
This jibes with Thursday's factory orders, which jumped 4.1% in May, complementing last week's advance release on durable goods. New orders for manufactured durable goods in May increased $12.6 billion, or 6.1%. Electronic and other electrical equipment had the largest increase -- 26.4% to $46.6 billion -- due to electronic components. That is the largest increase since August 1997, reflecting the increasing role of semiconductors in next-generation consumer devices and Internet-infrastructure equipment.
Just last Friday, the Semiconductor Industry Association reported that worldwide sales of semiconductors reached a record high of $15.8 billion in May, increasing from $11.3 billion in May 1999. Orders of electronics and electrical equipment posted a 26% month-to-month increase.
Underlying business-information-technology demand remains strong amid supply shortages of popular components. Bookings for PC equipment rose again in May, while communications equipment was static -- at a high level. In addition to microprocessors and DRAM, which are used in PCs, semiconductor products that played a major role in May's sales included Field Programmable Logic Devices (FPLDs), Digital Signal Processors (DSPs), and flash memory, all commonly found in communications products, and in short supply.
Many manufacturers say their inventories are low, and anticipate the market getting tighter. Manufacturers of capacitors and flash memory for wireless devices and related industries are estimating that component shortages -- which have prompted some cell-phone and Internet-access manufacturers to delay production of new devices -- will last longer than expected. Shortage in the flash market is expected to last well into 2001 and possibly 2002.
As long as we are seeing the development of new technology that's wireless, and more and more people switching over to Internet telephones, there is going to be a shortage in flash memory and all transistors, capacitors and other components that go with them.
Thanks tm for the update! |
