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Fairchild Semi (FCS) 15: Friday after the close, Fairchild Semi joined the long list of those to issue warnings for Q4. FCS' warning brings our total for Q4 warnings up to 475, which is 81% more than the same period of last year, and they're still coming fast and furious. Semiconductor companies have been especially hard hit this past quarter, with 28 companies warning of shortfalls versus only two in the year-ago period. No chip maker has been immune, we've got warnings ranging in company size from Intel to O2Micro and serving end markets from PC processors to cellular phones to automotive components. For Fairchild Semi to be coming up 4-5% short of Q4 revenue estimates, is almost a non-event given the severity of some of the shortfalls we've witnessed. However, the more troubling aspect of FCS' warning is their outlook for the current quarter. FCS expects Q1 revenues to be about 5-8% below Q4, or in the $430 mln neighborhood. Q1 is a seasonally weak quarter for FCS, but the sequential decline comes as a result of the inventory backlog that is still plaguing the entire industry. We suspect that foundry revenues were disproportionately affected given that National Semi (NSM) already warned of inventory corrections, and NSM contract manufacturing accounts for about 5.3% of FCS revenues. We also suspect that FCS's largest customer, Samsung (about 6.4% of FCS sales), is grappling with the same issues. The important lesson to take from FCS' warning regards the scope of the worldwide slowdown in chip sales. We have complimented FCS management in the past for their diversified approach in terms of end market and product breadth as well as geographic sales diversity. The fact that FCS does not see things improving this quarter is not a surprise to industry watchers, but rather a more definitive sign that the slowdown will not be rectified in this quarter, and expecting a turnaround in calendar Q2 is probably overly optimistic. - Matt Gould, Briefing.com
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