Fitch: Consumer Weakness Drives Negative Outlook for Semiconductors in 2009
...Spansion Inc. (Spansion): The Negative Rating Outlook is driven primarily by Spansion's weak liquidity position and strained financial flexibility, which Fitch believes is likely to worsen in 2009 and potentially require the company to obtain external financing. It remains to be seen as to whether Spansion's aggressive capital and discretionary spending cuts are sufficient to offset expectations for meaningfully lower revenues and profitability over the near-term. Spansion should be negatively impacted by a weaker cellular handset growth, which is underscored by the company's largest customer providing unseasonably weak sales guidance for current quarter. Spansion's embedded flash memory businesses should suffer from weaker spending on consumer electronics and declining automotive production levels through 2009. As a result, free cash flow should be negative for fourth quarter-2008 and all of 2009.
While Spansion's leading-edge manufacturing capacity and deepening relationships with foundry partners should enable the company to achieve sustainable operating profitability through a normalized pricing environment, Fitch remains concerned with the company's inability to command premium pricing, despite consolidating additional market share and increasing penetration of its higher density products. Positively, Spansion continues to reduce costs and is in the process of outsourcing its test and assembly operations, which should modestly reduce capital spending. Fitch believes Spansion's leading competitors, Samsung Electronics Co. (Samsung) and, to a lesser extent, Numonyx, also benefit from greater financial flexibility and, therefore, have been better able to withstand the currently challenging operating environment. ...
marketwatch.com
Article also contains rating trends for AMD, TI, STM, Freescale, TSMC, UMC, Hynix, ASML, and a couple of others.
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