Dan Niles, an analyst at Lehman Brothers, was the most bearish on the chip industry at the FSA event, saying that the chip market may be weak for a couple of years. He says chipmakers shouldn't have been so surprised by the rapid deterioration of the market.
"The signs were there -- with the dot-bombs, the weakness in the PC market in October -- but a lot of the communications chip makers ignored it," Mr. Niles said. "Now the PC industry has worked off a lot of its inventory, but the communications companies still have a lot. This is going to be painful and last a while."
Mr. Niles said the market is suffering from multiple blows, with rolling recessions possible as weakness in the United States and Japan spreads to Europe and Asia. All told, he estimates the market crashes to have wiped out $10 trillion in paper wealth worldwide, about 30 percent of worldwide gross domestic product, making consumers everywhere feel as if they don't have any money to spend. In the 1996 chip downturn, the PC market was weak but communications was strong. By contrast, the PC market is now weak, wireless communications is weaker, and wired communications is worst of all, he says. In the second half, Mr. Niles expects much weaker pricing across the board as chipmakers try to stimulate demand to fill excess capacity in their factories. |
