Analyst's Couch: IC biz up despite wireless hiccup
siliconstrategies.com
By Mark LaPedus
Silicon Strategies
04/09/2004, 11:05 AM ET
SAN JOSE, Calif.--The fundamentals remain strong in the semiconductor and chip-equipment sectors despite some hiccups in the marketplace this week, especially in wireless, according to analysts.
For example, citing stronger-than-expected demand for ICs, SG Cowen Securities Corp. this week raised its forecast for the semiconductor industry to 25 percent growth in 2004, up from 20 percent in its original prediction.
The New York-based investment banking firm also believes that end-user markets will grow 17 percent in 2004, verses 14 percent in its original projection. It also projects an inventory swing of $12 billion, compared to $11 billion in its previous stance.
Despite the new and bullish forecast, there are some worrisome signs in the market, especially in one of the strongest sectors--wireless. This week, for example, cellular-phone giant Nokia Group lowered its estimates, which impacts Texas Instruments Inc. and other chip makers. Nokia said that its handset units declined by about 18 percent sequentially in the quarter, which is in line with seasonal trends but somewhat worse than for the overall market.
"We believe that the overall handset business will remain robust in 2004 and that TI will be a lead beneficiary of this trend," said Erach Desai, an analyst with American Technology Research Inc. of Greenwich, Conn.
"For the better part of 2003, Nokia has been a 10-12 percent revenue customer for TI," Desai said. "The knee-jerk reaction to any potential bad news on cellular handsets at Nokia is to sell off TI shares in sympathy. At this point, however, we get no sense from Nokia's commentary that there is any medium to longer term issue at Nokia, other than near-term miscues."
TI's wireless revenues are expected to be up 6 percent sequentially in the first quarter, with flattish unit growth out-paced by positive average selling price trends.
Overall, demand for semiconductors is expected to outstrip supply well into 2005, driven by the automotive, consumer and mobile phone markets, according to Future Horizons, a market research firm based in the United Kingdom.
"Confidence is back in semiconductors and the upswing should outlive previous positive periods," said Malcolm Penn, CEO of Future Horizons. "But if the industry over invests in production and creates flabby inventory levels as it has traditionally done, another downturn will begin to bite late in 2005 or early 2006," he said.
"It is impossible to fine tune fab capacity with market demand, so if these factors occur the industry will inevitably overshoot its recovery and so trigger a downturn," said Penn.
The signs are also positive in the chip-equipment sector. "We expect semi equipment providers to be collectively upbeat with strong front-end orders in the 20 percent sequential growth range in the March quarter," said Bill Ong, an analyst with American Technology Research in San Fransciso.
"Back-end tool makers could generally report plus or minus 10 percent sequential order growth off the strong 40 percent plus levels last quarter," Ong said. "June quarter orders are expected to be flat to up 10 percent with order re-acceleration toward the end of the year."
The June quarter also look strong. "We expect front-end equipment orders to be in the 20 percent sequential growth range with June quarter guidance to be up in the 5-10 percent levels, a healthy moderation in growth before re-acceleration in late 2004," he said. |
