Semiconductors Fall to 9-Month Low
By Nicole Volpe
NEW YORK (Reuters) - Semiconductor stocks fell steeply on Monday, an indication of the wildly out-of-favor status of the basic building blocks of computer technology in a time of jitters about the wider economy.
The closely watched Philadelphia semiconductor index closed down 13.43 points, or more than 1 percent, at 785.96, a level not seen since early February.
The dip came despite indications that the semiconductor industry is in the midst of its strongest sales growth since 1995, when growth was 38 percent. Worldwide, the industry is on track for sales of more than $231.6 billion this year, an increase of 37 percent from 1999, according to the market research firm Dataquest.
But analysts said some investors, worried that sales strength is nearing a peak, were a becoming skittish about staying invested in chip stocks.
Merrill Lynch analyst Joe Osha said the nature of the semiconductor sector, which runs in boom-and-bust cycles brought on by alternating periods of oversupply and shortages, was feeding investor uncertainty.
``This is what happens when you get into a period where there are doubts about where the semi-cycle is going -- even areas where there are no fundamental problems are taking a hit,'' he said ``The cycle is long in the tooth and so it is more vulnerable.''
Semiconductor sales growth -- with the highest growth in memory chips, up more than 60 percent -- is being boosted by new communications uses, Dataquest said.
Osha said investors have become uneasy with news of slack demand for semiconductors or oversupply of finished products that chips are built into, such as personal computers and cell phones.
``If you look at the three big end markets for integrated circuits -- PCs, wireless and wireline -- you have some problems in two of those areas,'' said Osha.
``PCs, there is a combination of DRAM (memory chip) inventory build -- although that's reversing -- and rotten demand,'' he said. ``In wireless there's inventory build but end demand is reasonably good, and wireline is going to do a very good quarter.''
He said there is still room for gains in chip stocks, barring a recession.
He pointed out that the Philadelphia semiconductor index was at 400 a year ago, meaning investors have seen good returns.
``If we don't have a downturn, the index is back at 1,000,'' he said. ``We're in watch-and-wait mode here.''
Dataquest forecast a moderate downturn in 2003.
``Barring any major economic downturn or earth-shaking disaster, the industry in 2002 is forecast to reach low double-digit growth, with a moderate but cyclical downturn in the forecast for 2003,'' Dataquest said in a statement.
``A return to moderate growth is expected in 2004,'' the statement said.
Intel Corp. (NasdaqNM:INTC - news), which makes the chips found in most personal computers, closed down 7/8 to $39-1/8, a low not seen since early January. Intel warned in September that its third-quarter sales would fall short of analysts' expectations.
Texas Instruments Inc. (NYSE:TXN - news), the world's No. 1 maker of computer chips for wireless phones and high-speed modems, closed off $1-3/4 to $45-1/4, an 11-month low.
Rambus Inc. (NasdaqNM:RMBS - news), a designer of memory chip technology, fell $8-5/8, or more than 10 percent, to $71-3/8.
Canadian communications chip maker PMC-Sierra Inc. (NasdaqNM:PMCS - news) was down $9, or more than 4 percent, at $190-1/16. |
