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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Dealer who wrote (5492)	10/4/2000 12:49:35 PM
From: Dealer	Read Replies (1) \| Respond to of 65232

INTC--Semiconductors seen strong despite cancelled orders By Lucas van Grinsven LONDON, Oct 4 (Reuters) - The semiconductor boom is expected to continue in 2001 on the back of strong demand and modest supply, albeit at a slower pace, despite recent order cancellations at Asian chip makers, analysts said on Wednesday. ``We see growth still in excess of 30 percent in 2001,'' said analyst Tim Mahon at investment bank Credit Suisse First Boston (CSFB). Demand would be driven by chips for items such as mobile phones, cars, televisions and dvd-players. Meanwhile demand for computer chips could pick up when Windows 2000 comes on stream which, typically, requires double the computer memory of its predecessor Windows NT. Jitters have hit the semiconductor industry in the last two weeks, after the world's largest chip maker Intel (NasdaqNM:INTC - news) knocked the market with a warning that its revenue growth would be a few percentage points lower than expected. The Philadelphia semiconductor index (^SOXX - news) has fallen to 812 points from 1031 since the Intel warning. Analysts have skimmed the market for signals that would reveal a new trend, and saw mixed messages. Most computer makers said they remained bullish, despite Intel's warning but Apple (NasdaqNM:AAPL - news) issued a profit warning of its own last week. Some Asian semiconductor manufacturers have now said some orders were cancelled, confirming Intel's point of slackening demand. Foundries in Asia, which are outsourcing centres for chip manufacturers, are still sold out for November and while they are receiving orders for December the outlook is hazy, said semiconductor analyst Bhavin Shah at CSFB. ``Motorola and others have cancelled orders. Computer makers may be saying they still see a good fourth quarter, but someone is cancelling orders,'' he said at a presentation. Merchant bank Bear Sterns said personal computer makers needed one or two weeks more to figure out what the trend would be for the fourth quarter. GROWTH SET TO REMAIN STRONG However, the semiconductors industry as a whole, not confined to just computer chips, grew in August by a surprisingly strong 53 percent year-on-year to $18.9 billion. Unit growth was close to 30 percent, the Semiconductor Industry Association said on Tuesday. ``This growth rate is unsustainable,'' said industry analyst Mahon, based in Silicon Valley. One explanation for the forecast lower sales growth, and recent falling prices for computer memory chips on the spot market, could be that companies have started depleting inventories they built up in the past year when supply looked tight, said chip equipment analyst John Pitzer at CSFB. He dismissed fears about oversupply now that demand growth seems to be flattening off. ``There is a lot of fear for oversupply, but despite strong growth companies are still spending around the trend line,'' he said. Estimated investment in new machinery for 2001 is 25.5 percent of total revenues, slightly below the long-term average, compared with 26 percent in 2000 and 19.5 percent in 1999. Reasons why some companies were not able to boost output were both tied to technical and business issues. Foundries' staff are no longer rewarded for reaching revenue targets but instead receive bonuses based on profitability, which prevents them from overspending. Korean firms have their hands tied in the wake of the country's financial crisis. Meanwhile, the industry is facing a daunting task to migrate to 300 millimetre silicon wafers from 200 millimetre wafers. The ramp-up to this new production method is expected to be beset by teething problems. Also equipment makers like ASM Lithography , which announced its intent to buy Silicon Valley Group (NasdaqNM:SVGI - news) earlier this week, have run out of capacity and are sold out until next year.