IC Industry Faces Months of Retrenchment, Solomon Analyst Says
December 1, 2000 (TAIPEI) -- Jonathan Joseph, of Solomon Smith Barney said that the global semiconductor industry is set for a period of retrenchment and will probably bottom out in the third quarter of next year.
At Solomon Smith Barney, Joseph is responsible for predicting global developments in the semiconductor industry. He said that microchip makers would face an uphill struggle in terms of operations, and that related stocks were likely to fall 10 percent to 20 percent before the industry begins to recover.
In July, Joseph's predictions that the microchip industry seemed to be sliding downwards from a peak (contrary to the widespread optimistic view for the IC industry), were severely criticized. However, recent trends in the semiconductor industry suggest that he may have gotten it right.
Joseph said that Solomon Smith Barney's decision to downgrade its rating for the semiconductor industry in July came after Intel launched bulk CPU shipments, which was believed to be the main reason for the glutted chip market.
Intel finally found it difficult to profit from its large-scale product deliveries, because of waning demand in the wireless communication market. Moreover, the earnings warnings issued recently by the cable communication industry, which had a healthy forecast in October, also contributed to Solomon's downgrade decision in respect to the semiconductor industry.
Joseph told investors (who wished to take advantage of the sharp fall in semiconductor stocks) to be patient. "There are no immediate profits to be made from semiconductor issues," he said.
The semiconductor industry may recover next autumn, provided that the makers confront the problem of redundant production as quickly as possible. Also, he suggested that foreign investors should include several wafer foundry leaders, such as Taiwan Semiconductor Manufacturing Corp. (TSMC) and United Microelectronics Corp. (UMC), as important investment targets over the next three to five years.
(Commercial Times, Taiwan)
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