Chip Maker Hears 650 Million
Cellulars Ringing In 2001
(09/07/00, 8:35 p.m. ET) By J. Robert Lineback, Semiconductor
Business News
Some 600 to 650 million cell phones will likely be
produced in 2001, top brass at National
Semiconductor Corp. told Wall Street analysts
Thursday.
National Semiconductor (stock: NSM) executives
sought to reassure worried analysts, saying there is no
evidence that chip demand in wireless phones is cooling
despite major adjustments in inventory by some of the
top-tier handset makers.
During a conference call with analysts, executives from
the Santa Clara, Calif., company said wireless chip
customers were continuing to forecast 420 to 430
million cellular phone shipments in 2000, and
preliminary forecasts from handset makers now show
the number of phones could increase by 40 percent to
50 percent in 2001.
Last year, 270 million cell phones were produced
worldwide.
"Most of the year is almost behind us and so that
number [for 2000] looks like it will be pretty close,"
said Don MacLeod, chief financial officer of National.
"We are working on early indications from our
customers on what they want next year, from a
procurement perspective, and they are talking 600 to
650 million handsets at this point."
Thursday's conference call was hosted by National after
the company posted a 33 percent increase in net
revenues to $640.8 million in the first fiscal quarter,
ending Aug. 27, compared to $481.8 million last year.
National's net income grew to $144.2 million versus
$47.1 million in the quarter last year, including special
charges and gains.
High on the minds of financial analysts was the state of
the wireless chip market. About 25 percent of
National's revenues come from that segment, according
to company officials, who admitted that there had been
significant adjustments by key customers in that market
during the last three months.
"The good news for National is that it felt like to us
more shifting market share amongst the Tier 1 [handset
suppliers] and to a lesser extent from Tier 1 to Tier 2,"
said Brian L. Halla, chairman. "But based on what we
see and what we hear from our customers, we still feel
the market will support the 420 to 430 million units, and
the back half of the year [2000] should be stronger than
the front [half]."
Halla said it is becoming more complex to serve the
cellular phone industry as chip customers shift more of
their handset production to third-party manufacturers
and product life cycles shrink. Ericsson AB (stock:
ERICY) of Stockholm, Sweden, continues to be
National's largest wireless chip customer, he said.
Another big customer -- Motorola Inc. (stock: MOT),
Schaumburg, Ill. -- has just completed a major
adjustment in backlog orders as it repositions itself in
the low-end of the handset marketplace, Halla noted.
"From our vantage point, we think these adjustments
are behind us and we have seen restored order rates in
just the last few weeks to support that [belief]," said the
CEO, referring to Motorola's chip purchases for cellular
phones.
For other cellular phone manufacturers, inventory
adjustments are mostly completed, according to
MacLeod, but he added that some shortages of
components still are keeping National customers
"protective" in releasing new designs to manufacturing.
"Some of those components are semiconductors -- not
ours -- and some of those components are passives and
connector type products -- again, not ours," the CFO
told analysts. "I'm not sure the industry is clearly beyond
the stage of being somewhat protective in its ordering
patterns to insure that they have all the right components
for new product launches.
"Our lead times [for semiconductors] haven't changed,"
MacLeod assured the analysts. "We are still in the
mode of being able to quote whatever the customers
want -- typically being six to eight weeks. Our
manufacturing machine is supporting that."
National executives said they wanted to wait until the
fourth quarter before firming up their own forecasts for
cellular phones in 2001.
"But it is looking pretty good for a market that was only
270 million phones last year," MacLeod added. |
