Analysts see growth after a slow first quarter
eetimes.com
Semiconductor companies serving the communications market should
expect continued strong revenue growth in 1999, according to David
Wong of Needham. Total revenues for the nine communications
semiconductor companies followed by Needham will grow an estimated 40
percent this year, Wong said.
By Margaret Quan
EE Times
(01/14/99, 1:25 p.m. EDT)
NEW YORK — Expressing cautious optimism, analysts and industry
executives at a Needham & Co. conference this week said the world
semiconductor market should experience growth this year after weathering
a slow first quarter.
In a report titled "The Winter of our Discombobulation," Needham
semiconductor analyst A. A. LaFountain III said the semiconductor market
will see revenue growth of 14 percent this year, but that first-quarter
business could be slow due to the dramatic decline in capital spending by
chip makers that began in early 1998.
"Excess investment in 1995, 1996 and 1997 had set up the industry for a
substantial spending reduction in order to bring the supply situation into
alignment with its long-term trend," according to LaFountain. That will keep
chip prices favorable to manufacturers over the next several years, he said.
But a weak first quarter could spoil the party, analysts said.
Don Macleod, chief financial officer of National Semiconductor Corp.
(Santa Clara, Calif.), said National is cautious about the first calendar
quarter due to lingering bad memories of early 1998, when National was
burned by the bloated PC component inventories of PC manufacturers,
which took months to work off the oversupply.
National, which has a window on the PC market via sales of its Super I/O
board, found in almost half of all PCs, said the PC consumer business
picked up in August and continued through October. Macleod said
National's largest PC customers stopped building product in early
December to clear the channel, but have started building again.
National sees an enormous opportunity to exploit its Cyrix product
portfolio this year, Macleod said. That opportunity will depend on National
delivering a number of products as planned, including a PC-on-a-chip
scheduled for delivery in mid-1999, the MXi processor core, and the Jedi
MXi core with new standard interfaces, set for introduction in September.
National's analog business remains problematic, and is not growing. Analog
products comprised 39 percent of National's sales as of its second fiscal
quarter ended Nov. 29, while the Personal Systems business unit
comprised 34 percent of revenue and Communications and Consumer
products accounted for 27 percent.
MacLeod predicted that sub-$500 boxes will be the next PC products to
take the U.S. market by storm over the next few months.
Semiconductor companies serving the communications market should
expect continued strong revenue growth in 1999, according to David
Wong of Needham. Total revenues for the nine communications
semiconductor companies followed by Needham will grow an estimated 40
percent this year, Wong said.
The overall trend toward greater bandwidth is driving the growth of one of
those companies — Vitesse Semiconductor Corp., said Lou Tomasetta,
president and chief executive officer of Vitesse (Camarillo, Calif.). The
need for bandwidth will grow by a factor of 25 between 1995 and 2005,
analysts said.
Vitesse plans to meet those needs by supplying ATM, Ethernet, Fibre
Channel and Sonet/SDH products that support bandwidths up to 2.5 and
10 gigabits/second, Tomasetta said.
Communications-based revenue, which currently represents 78 percent of
Vitesse's revenue, will grow more than 60 percent in 1999, Tomasetta said.
Vitesse is moving towards a communications-heavy business because there
are stronger growth drivers in that segment than in test equipment, which
makes up 22 percent of Vitesse's sales.
The company, known as a supplier of gallium arsenide ICs, will also
develop CMOS circuitry where technically feasible, and expects 20 to 30
percent of its revenue to come from CMOS products by 2001, Tomasetta
said.
Vitesse plans to supply an entire system of 2.5-Gbit/s transmission
products using its own technology and technology it acquires from other
companies, Tomasetta said. |
