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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: StanX Long who wrote (53029)	9/24/2001 7:55:13 PM
From: Proud_Infidel	Respond to of 70976

Analysts say semi slump will single out consumer ICs By Will Wade EE Times (09/24/01 18:26 p.m. EST) SAN MATEO, Calif. — The semiconductor market was weak before the recent terrorist attacks sent consumer confidence and spending patterns into a tailspin, one which will hit chip companies that rely on the consumer sector especially hard, analysts said. But there are signs that the capital equipment market may have reached bottom and will not be hit harder by current economic tribulations. Eric Chen, semiconductor equity analyst for investment banking firm JP Morgan in San Francisco, said the immediate impact of the Sept. 11 terrorist attacks, which subsequently pushed the stock market to three-year lows, may not be immediately felt in the chip sector. Sales figures for the third calendar quarter will not be too far off target, and the impact on the supply chain has turned out not to be very significant despite the temporary loss of air transportation within the United States. Looking further down the road, however, Chen said he expects semiconductor sales will remain flat in 2002, with a sluggish first half and some modest recovery in the second half. "One realization that we have come to is that the impact on revenue and earnings from the Sept. 11 tragedy is likely to be worse for people who are serving the consumer directly," he said. Key players in this area include microprocessor makers Intel Corp. and Advanced Micro Devices Inc.; some 40 percent of PCs are sold directly to consumers, and much of that spending has dried up since the attacks. Eric Ross, semiconductor analyst for merchant banking house Thomas Weisel Partners in New York, just lowered his PC market forecast due to ongoing economic concerns that were exacerbated by a very weak back-to-school season. Instead of an earlier forecast of 33 million units, he now expects 30 million PCs to ship this quarter. For the entire year, he is dropping estimates from 136 million units to 124 million units. In a research report, Ross wrote that motherboard vendors say back-to-school PC sales were disappointing, and price cuts from Intel for its Pentium 4 chip seem to have had little impact on sales. "Back-to-school demand appears to have been slower than our earlier expectations, while recent tragic events in the United States have increased economic uncertainty for an economic recovery," he wrote. Chen compared the current economic climate to period of the Gulf War, just over a decade ago. "We find the macroeconomic situation appears to be quite similar, but the semiconductor market internally is in much worse shape than 10 years ago," he said. Key differences are the excess inventory levels that have dogged the chip sector all year, and weak pricing. Overall, the chip sector is not prepared for a serious economic slowdown. However, Chen pointed out that the semiconductor capital equipment market may not be hit as hard as the chip sector itself, primarily because those companies have already battened down the hatches to weather this economic storm. "The equipment companies are already running their businesses at maintenance levels," he said, after they were forced earlier this year to cut costs and prepare for a year of slow sales. Now that the economic typhoon is hitting the rest of the high-tech market, the gear vendors are ready for it. "For companies that sell into the capital spending markets, the financial impact of the recent tragedy may be smaller," he said.