With a story like this, it's becoming difficult to understand the sector bearishness...
Xilinx struggles to fulfill orders
By Anthony Cataldo
EE Times
(07/03/02 14:30 p.m. EST)
SAN MATEO, Calif. ? Xilinx Inc. said it is struggling to fulfill orders for some of its newer FPGA products following reports that programmable-logic players may be in for a rocky second half of the year.
A Xilinx spokeswoman said the company has seen "unexpectedly high demand" for its Virtex 2 FPGAs since the beginning of the year. Virtex 2 products make up more than 10 percent of the company's revenues, she said.
Eric Chen, an analyst at J.P. Morgan Securities Inc., issued a report Monday (July 1) saying Xilinx's inability to adequately meet demand "stemmed from the difficulties to yield at the leading process technology nodes and the foundry suppliers' general shortage of sub-0.18-micron capacity."
However, San Jose, Calif.-based Xilinx denied it is encountering manufacturing difficulties. The company's Virtex 2 devices are produced on a 0.15-micron process technology by foundry United Microelectronics Corp.
"It's not because of manufacturing problems," the Xilinx spokeswoman said. "It's the fact that the cycle time is such that it's hard to get [Virtex 2 products] into the hands of customers."
Chen's report also noted that long lead times may have motivated some customers to order more Xilinx FPGAs than needed, which has created excess inventory in the channel. "In our opinion, this moderate amount of excess inventory may be worked off during the September quarter, suppressing Xilinx's sales growth," wrote Chen.
But Xilinx is not worried about its inventory levels, the company spokeswoman said. "Excess inventory is not a problem in the distribution channel and at the end customer. Last quarter [ended March], distributor inventory went down to its lowest level ever. Little has changed that since then," she said.
Altera Corp., Xilinx's crosstown rival, faces similar inventory issues, Chen report noted. An Altera spokesman said the company won't respond to these statements until its third-quarter update on July 22. The spokesman, however, noted that the company has started delivering its 0.13-micron based Stratix FPGA ahead of schedule and has not run into manufacturing problems at its foundry, Taiwan Semiconductor Manufacturing Co. Ltd.
Besides having to contend with supply and inventory issues, both companies face declining demand from wireless infrastructure and storage customers, Chen said. As a result, he lowered Altera's estimated revenues for the 2002 calendar year from $763 million to $724 million and Xilinx's from $1.22 billion to $1.16 billion. |
