Semiconductor Trade Group's Sales Forecasts May Be Overly Optimistic
Thursday November 7, 12:40 pm ET
By Donna Fuscaldo
biz.yahoo.com
Dow Jones Newswires
NEW YORK -- The Semiconductor Industry Association's forecast for double-digit chip sales growth in 2003 and 2004 may be music to the ears of chip companies and investors, but some analysts are warning that the predications could be too optimistic.
Late Wednesday, the SIA, a trade group based in San Jose, said it expects semiconductor sales to increase by 1.8% in 2002, by 19.8% in 2003, and by 21.7% in 2004. The SIA said long term the annual growth rate will be 8% to 10%.
While the trade group's latest forecast varies slightly from its past predication in June, when it called for sales to increase 3% in 2002, 23% in 2003, and 21% in 2004, some analysts say the numbers are still too bullish.
Take Douglas Lee, an analyst at Banc Of America Securities LLC. Last week, he lowered his 2003 industry growth estimate to between 8% and 10% from 15%.
In a research report Thursday, Mr. Lee wrote that he believes SIA's forecast for 2003 is "aggressive."
"While nobody's track record is impeccable, we note that SIA has historically proven to be overly optimistic when setting forecasts," wrote Mr. Lee.
The analyst pointed to the SIA's forecast for industry sales in 2001, when it said sales would reach $249 billion. According to Mr. Lee, actual sales fell $ 110 billion shy of the estimate.
Credit Suisse First Boston Corp. analysts Tim Mahon and Michael Masdea agree that SIA's forecasts may be too optimistic.
"In light of the fact that SIA members comprise 70 semiconductor companies, representing 90% of U.S.-based production, we are somewhat concerned at the level of optimism displayed in their composite forecast," wrote the analysts in a report Thursday. "The robust 2003 growth forecast is inconsistent with the cautious outlook provided by major players in their Q3 earnings calls."
The analysts added that recent lay-off announcements from Applied Materials Inc. (NasdaqNM:AMAT - News) and Texas Instruments Inc. (NYSE:TXN - News) , coupled with expectations of further restructuring at Cypress Semiconductor Corp. (NYSE:CY - News) and Advanced Micro Devices Inc. (NYSE:AMD - News) , suggest that companies' confidence levels "may not support the rosy forecast."
Earlier this week, Applied Materials announced it would lay off 1,750 workers, or about 11% of its workforce, as the downturn in the semiconductor industry marches on.
Officials at the SIA weren't immediately available for comment.
-By Donna Fuscaldo, Dow Jones Newswires; 201-938-5253; donna.fuscaldo@ dowjones.com |
