Jess,
I think you are right in saying that it might be too early in buying the equipment stocks. Semi manufacturers will have to show signs of recovery before that makes sense, and that recovery is no where in sight:
Another chip forecast drops as price erosion spreads
A service of Semiconductor Business News, CMP Media Inc.
Story posted at 8 a.m. EDT/5 a.m. PDT, 6/2/98
By J. Robert Lineback
PHOENIX--Chronic overcapacity, fierce pricing
competition and widespread uncertainty in the
semiconductor industry continue to dampen revenue
growth prospects in worldwide markets, according to
Semico Research here, which has revised its forecast
downward showing chip sales falling 1% in 1998. Last
year, semiconductor revenues staged an anemic
recovery, growing about 4% to $137 billion, after
dropping 9% in 1996.
"Pricing pressure has now overflowed into many other
product categories like programmable logic, standard
cells, microprocessors, microcontrollers as well as
microperipherals," warned analyst Jim Feldhan,
president of the Phoenix-based market research and
consulting firm.
In addition to lowering its revenue forecast, Semico has
adjusted downward its prediction of semiconductor unit
shipments to a 1.0% increase this year. The research
firm now expects 256 billion ICs and discrete
semiconductors to be shipped in 1998 compared to its
previous forecast of 2.1% growth (or 259 billion units),
which was issued last November.
Other market research firms have also lowered their
forecasts citing price erosion, a glut of production
capacity--especially in memories--and continued
weakness in Japan's economy. On Wednesday, the
Semiconductor Industry Association (SIA) plans to
release its mid-year forecast, based on recently revised
numbers from the World Semiconductor Trade Statistics
(WSTS) organization. A spokesman for the SIA hinted
that the revised numbers will in line with recently
lowered forecasts by industry analysts.
Low average selling prices (ASPs) remains the chip
industry's biggest problem, according to Semico. "The
industry continues to experience extreme pricing
pressure on memory, and as the cost per megabit
declines, the bit growth rate will show about 90% for
1998," Feldhan said. "Micro logic will experience a dollar
growth of 6% as we continue to see a shift to lower cost
PCs and lower prices for microcontrollers and
microperipherals."
Semico said PC demand remains strong, and
microprocessor unit shipments have tracked closely to
the company's projections, but competitive conditions
have kept processor ASPs low.
From a regional view, Semico said the European market
is projected to be strongest with 2.5% growth. The Asia
Pacific market competition will continue to intensify
after suffering the fallout of economic troubles last year
and early in 1998. However, conservative moves by
buyers and OEMs as well as consumer indifference for
electronic equipment will result in a decline in
semiconductor sales in Asia Pacific and Japan, the
research firm concluded. |
